Correlation Between Wipro and MOIL

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

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

Diversification Opportunities for Wipro and MOIL

-0.42

Correlation Coefficient

Wipro  MOIL

Very good diversification

The 3 months correlation between Wipro and MOIL is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Wipro Limited and MOIL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOIL Limited and Wipro 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 Wipro Limited are associated (or correlated) with MOIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOIL Limited has no effect on the direction of Wipro i.e., Wipro and MOIL go up and down completely randomly.

Pair Corralation between Wipro and MOIL

Assuming the 90 days trading horizon Wipro Limited is expected to under-perform the MOIL. But the stock apears to be less risky and, when comparing its historical volatility, Wipro Limited is 1.54 times less risky than MOIL. The stock trades about -0.07 of its potential returns per unit of risk. The MOIL Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  31,350  in MOIL Limited on December 28, 2024 and sell it today you would earn a total of  1,490  from holding MOIL Limited or generate 4.75% return on investment over 90 days.

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

Wipro Limited  vs.  MOIL Limited

Wipro Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wipro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

MOIL Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MOIL Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MOIL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Wipro and MOIL

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

The idea behind Wipro Limited and MOIL 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.