Correlation Between Oil Natural and IDFC First

Can any of the company-specific risk be diversified away by investing in both Oil Natural and IDFC First 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 IDFC First 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 IDFC First Bank, you can compare the effects of market volatilities on Oil Natural and IDFC First 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 IDFC First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Natural and IDFC First.

Diversification Opportunities for Oil Natural and IDFC First

0.9

Correlation Coefficient

Oil Natural  IDFC First

Almost no diversification

The 3 months correlation between Oil and IDFC is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and IDFC First Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDFC First Bank 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 IDFC First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDFC First Bank has no effect on the direction of Oil Natural i.e., Oil Natural and IDFC First go up and down completely randomly.

Pair Corralation between Oil Natural and IDFC First

Assuming the 90 days trading horizon Oil Natural Gas is expected to under-perform the IDFC First. In addition to that, Oil Natural is 1.03 times more volatile than IDFC First Bank. It trades about -0.19 of its total potential returns per unit of risk. IDFC First Bank is currently generating about -0.15 per unit of volatility. If you would invest  7,507  in IDFC First Bank on September 3, 2024 and sell it today you would lose (1,099) from holding IDFC First Bank or give up 14.64% of portfolio value over 90 days.

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

Oil Natural Gas  vs.  IDFC First Bank

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

IDFC First Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDFC First Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady 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 IDFC First

The main advantage of trading using opposite Oil Natural and IDFC First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Natural position performs unexpectedly, IDFC First 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 IDFC First will offset losses from the drop in IDFC First's long position.

The idea behind Oil Natural Gas and IDFC First Bank 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.