Correlation Between Speciality Restaurants and Indian Oil

Can any of the company-specific risk be diversified away by investing in both Speciality Restaurants and Indian Oil 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 Speciality Restaurants and Indian Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Speciality Restaurants Limited and Indian Oil, you can compare the effects of market volatilities on Speciality Restaurants and Indian Oil 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 Speciality Restaurants with a short position of Indian Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Speciality Restaurants and Indian Oil.

Diversification Opportunities for Speciality Restaurants and Indian Oil

0.73

Correlation Coefficient

Speciality Restaurants  Indian Oil

Poor diversification

The 3 months correlation between Speciality and Indian is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Speciality Restaurants Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and Speciality Restaurants 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 Speciality Restaurants Limited are associated (or correlated) with Indian Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Oil has no effect on the direction of Speciality Restaurants i.e., Speciality Restaurants and Indian Oil go up and down completely randomly.

Pair Corralation between Speciality Restaurants and Indian Oil

Assuming the 90 days trading horizon Speciality Restaurants Limited is expected to under-perform the Indian Oil. But the stock apears to be less risky and, when comparing its historical volatility, Speciality Restaurants Limited is 1.0 times less risky than Indian Oil. The stock trades about -0.03 of its potential returns per unit of risk. The Indian Oil is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,332  in Indian Oil on September 23, 2024 and sell it today you would earn a total of  3,376  from holding Indian Oil or generate 32.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.62%
Values	Daily Returns

Speciality Restaurants Limited  vs.  Indian Oil

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Indian Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Oil 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Speciality Restaurants and Indian Oil

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

The idea behind Speciality Restaurants Limited and Indian Oil 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.