Correlation Between Oil Natural and Modi Rubber

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

Diversification Opportunities for Oil Natural and Modi Rubber

-0.38

Correlation Coefficient

Oil Natural  Modi Rubber

Very good diversification

The 3 months correlation between Oil and Modi is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber Limited 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 Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of Oil Natural i.e., Oil Natural and Modi Rubber go up and down completely randomly.

Pair Corralation between Oil Natural and Modi Rubber

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.78 times more return on investment than Modi Rubber. However, Oil Natural Gas is 1.29 times less risky than Modi Rubber. It trades about 0.0 of its potential returns per unit of risk. Modi Rubber Limited is currently generating about -0.05 per unit of risk. If you would invest  26,998  in Oil Natural Gas on October 20, 2024 and sell it today you would lose (341.00) from holding Oil Natural Gas or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Oil Natural Gas  vs.  Modi Rubber 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 comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Oil Natural and Modi Rubber

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

The idea behind Oil Natural Gas and Modi Rubber 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.