Correlation Between Oil Natural and Unitech

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

Diversification Opportunities for Oil Natural and Unitech

0.33

Correlation Coefficient

Oil Natural  Unitech

Weak diversification

The 3 months correlation between Oil and Unitech is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas and Unitech Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unitech 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 Unitech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unitech Limited has no effect on the direction of Oil Natural i.e., Oil Natural and Unitech go up and down completely randomly.

Pair Corralation between Oil Natural and Unitech

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.66 times more return on investment than Unitech. However, Oil Natural Gas is 1.51 times less risky than Unitech. It trades about -0.02 of its potential returns per unit of risk. Unitech Limited is currently generating about -0.07 per unit of risk. If you would invest  24,316  in Oil Natural Gas on November 20, 2024 and sell it today you would lose (951.00) from holding Oil Natural Gas or give up 3.91% of portfolio value over 90 days.

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

Oil Natural Gas  vs.  Unitech Limited

Oil Natural Gas

Risk-Adjusted Performance

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Unitech Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unitech Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Oil Natural and Unitech

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

The idea behind Oil Natural Gas and Unitech 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.