Correlation Between Vishnu Chemicals and Indian OilLimited

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

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

Diversification Opportunities for Vishnu Chemicals and Indian OilLimited

-0.37

Correlation Coefficient

Vishnu Chemicals  Indian OilLimited

Very good diversification

The 3 months correlation between Vishnu and Indian is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vishnu Chemicals Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian OilLimited and Vishnu Chemicals 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 Vishnu Chemicals Limited are associated (or correlated) with Indian OilLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian OilLimited has no effect on the direction of Vishnu Chemicals i.e., Vishnu Chemicals and Indian OilLimited go up and down completely randomly.

Pair Corralation between Vishnu Chemicals and Indian OilLimited

Assuming the 90 days trading horizon Vishnu Chemicals Limited is expected to generate 1.28 times more return on investment than Indian OilLimited. However, Vishnu Chemicals is 1.28 times more volatile than Indian Oil. It trades about 0.09 of its potential returns per unit of risk. Indian Oil is currently generating about -0.04 per unit of risk. If you would invest  40,240  in Vishnu Chemicals Limited on December 29, 2024 and sell it today you would earn a total of  5,400  from holding Vishnu Chemicals Limited or generate 13.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Vishnu Chemicals Limited  vs.  Indian Oil

Vishnu Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vishnu Chemicals Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical indicators, Vishnu Chemicals sustained solid returns over the last few months and may actually be approaching a breakup point.

Indian OilLimited

Risk-Adjusted Performance

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 rather sound technical and fundamental indicators, Indian OilLimited is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vishnu Chemicals and Indian OilLimited

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

The idea behind Vishnu Chemicals 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.