Correlation Between Tamilnad Mercantile and Indian Oil

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

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

Diversification Opportunities for Tamilnad Mercantile and Indian Oil

-0.18

Correlation Coefficient

Tamilnad Mercantile  Indian Oil

Good diversification

The 3 months correlation between Tamilnad and Indian is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tamilnad Mercantile Bank and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and Tamilnad Mercantile 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 Tamilnad Mercantile Bank 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 Tamilnad Mercantile i.e., Tamilnad Mercantile and Indian Oil go up and down completely randomly.

Pair Corralation between Tamilnad Mercantile and Indian Oil

Assuming the 90 days trading horizon Tamilnad Mercantile Bank is expected to generate 0.77 times more return on investment than Indian Oil. However, Tamilnad Mercantile Bank is 1.3 times less risky than Indian Oil. It trades about 0.03 of its potential returns per unit of risk. Indian Oil is currently generating about -0.18 per unit of risk. If you would invest  44,850  in Tamilnad Mercantile Bank on October 8, 2024 and sell it today you would earn a total of  835.00  from holding Tamilnad Mercantile Bank or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Tamilnad Mercantile Bank  vs.  Indian Oil

Tamilnad Mercantile Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tamilnad Mercantile Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Tamilnad Mercantile is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Tamilnad Mercantile and Indian Oil

The main advantage of trading using opposite Tamilnad Mercantile and Indian Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tamilnad Mercantile 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 Tamilnad Mercantile Bank 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.