Correlation Between Oil Natural and Gangotri Textiles

Can any of the company-specific risk be diversified away by investing in both Oil Natural and Gangotri Textiles at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Oil Natural and Gangotri Textiles into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oil Natural Gas and Gangotri Textiles Limited, you can compare the effects of market volatilities on Oil Natural and Gangotri Textiles and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Oil Natural with a short position of Gangotri Textiles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Natural and Gangotri Textiles.

Diversification Opportunities for Oil Natural and Gangotri Textiles

0.72

Correlation Coefficient

Oil Natural  Gangotri Textiles

Poor diversification

The 3 months correlation between Oil and Gangotri is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Gangotri Textiles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gangotri Textiles and Oil Natural is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Oil Natural Gas are associated (or correlated) with Gangotri Textiles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gangotri Textiles has no effect on the direction of Oil Natural i.e., Oil Natural and Gangotri Textiles go up and down completely randomly.

Pair Corralation between Oil Natural and Gangotri Textiles

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.74 times more return on investment than Gangotri Textiles. However, Oil Natural Gas is 1.35 times less risky than Gangotri Textiles. It trades about -0.12 of its potential returns per unit of risk. Gangotri Textiles Limited is currently generating about -0.12 per unit of risk. If you would invest  28,550  in Oil Natural Gas on September 14, 2024 and sell it today you would lose (3,145) from holding Oil Natural Gas or give up 11.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Oil Natural Gas  vs.  Gangotri Textiles Limited

Oil Natural Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Natural Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Gangotri Textiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gangotri Textiles Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Oil Natural and Gangotri Textiles

The main advantage of trading using opposite Oil Natural and Gangotri Textiles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Natural position performs unexpectedly, Gangotri Textiles can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Gangotri Textiles will offset losses from the drop in Gangotri Textiles' long position.

The idea behind Oil Natural Gas and Gangotri Textiles Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.