Correlation Between Aban Offshore and Eros International

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

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

Diversification Opportunities for Aban Offshore and Eros International

0.46

Correlation Coefficient

Aban Offshore  Eros International

Very weak diversification

The 3 months correlation between Aban and Eros is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aban Offshore Limited and Eros International Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros International Media and Aban Offshore 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 Aban Offshore Limited are associated (or correlated) with Eros International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros International Media has no effect on the direction of Aban Offshore i.e., Aban Offshore and Eros International go up and down completely randomly.

Pair Corralation between Aban Offshore and Eros International

Assuming the 90 days trading horizon Aban Offshore Limited is expected to under-perform the Eros International. But the stock apears to be less risky and, when comparing its historical volatility, Aban Offshore Limited is 1.24 times less risky than Eros International. The stock trades about -0.14 of its potential returns per unit of risk. The Eros International Media is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,813  in Eros International Media on August 31, 2024 and sell it today you would lose (240.00) from holding Eros International Media or give up 13.24% of portfolio value over 90 days.

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

Aban Offshore Limited  vs.  Eros International Media

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Eros International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eros International Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aban Offshore and Eros International

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

The idea behind Aban Offshore Limited and Eros International Media 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.