Correlation Between Western India and Aban Offshore

Can any of the company-specific risk be diversified away by investing in both Western India and Aban Offshore 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 Western India and Aban Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Western India and Aban Offshore Limited, you can compare the effects of market volatilities on Western India and Aban Offshore 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 Western India with a short position of Aban Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western India and Aban Offshore.

Diversification Opportunities for Western India and Aban Offshore

-0.1

Correlation Coefficient

Western India  Aban Offshore

Good diversification

The 3 months correlation between Western and Aban is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Western India and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and Western India 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 The Western India are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of Western India i.e., Western India and Aban Offshore go up and down completely randomly.

Pair Corralation between Western India and Aban Offshore

Assuming the 90 days trading horizon The Western India is expected to generate 1.14 times more return on investment than Aban Offshore. However, Western India is 1.14 times more volatile than Aban Offshore Limited. It trades about 0.15 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.05 per unit of risk. If you would invest  19,400  in The Western India on October 6, 2024 and sell it today you would earn a total of  4,518  from holding The Western India or generate 23.29% return on investment over 90 days.

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

The Western India  vs.  Aban Offshore Limited

Western India

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Western India are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Western India unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aban Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Western India and Aban Offshore

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

The idea behind The Western India and Aban Offshore 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.