Correlation Between Eros International and Aban Offshore

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

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

Diversification Opportunities for Eros International and Aban Offshore

0.46

Correlation Coefficient

Eros International  Aban Offshore

Very weak diversification

The 3 months correlation between Eros and Aban is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Eros International Media 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 Eros International 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 Eros International Media 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 Eros International i.e., Eros International and Aban Offshore go up and down completely randomly.

Pair Corralation between Eros International and Aban Offshore

Assuming the 90 days trading horizon Eros International Media is expected to generate 1.24 times more return on investment than Aban Offshore. However, Eros International is 1.24 times more volatile than Aban Offshore Limited. It trades about -0.06 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.14 per unit of risk. 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

Eros International Media  vs.  Aban Offshore Limited

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.

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.

Pair Trading with Eros International and Aban Offshore

The main advantage of trading using opposite Eros International and Aban Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eros International 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 Eros International Media 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.