Correlation Between Indian Overseas and Bodhi Tree

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

By analyzing existing cross correlation between Indian Overseas Bank and Bodhi Tree Multimedia, you can compare the effects of market volatilities on Indian Overseas and Bodhi Tree 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 Indian Overseas with a short position of Bodhi Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Overseas and Bodhi Tree.

Diversification Opportunities for Indian Overseas and Bodhi Tree

0.27

Correlation Coefficient

Indian Overseas  Bodhi Tree

Modest diversification

The 3 months correlation between Indian and Bodhi is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Indian Overseas Bank and Bodhi Tree Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodhi Tree Multimedia and Indian Overseas 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 Indian Overseas Bank are associated (or correlated) with Bodhi Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodhi Tree Multimedia has no effect on the direction of Indian Overseas i.e., Indian Overseas and Bodhi Tree go up and down completely randomly.

Pair Corralation between Indian Overseas and Bodhi Tree

Assuming the 90 days trading horizon Indian Overseas Bank is expected to generate 0.82 times more return on investment than Bodhi Tree. However, Indian Overseas Bank is 1.22 times less risky than Bodhi Tree. It trades about -0.06 of its potential returns per unit of risk. Bodhi Tree Multimedia is currently generating about -0.1 per unit of risk. If you would invest  6,368  in Indian Overseas Bank on September 27, 2024 and sell it today you would lose (1,199) from holding Indian Overseas Bank or give up 18.83% of portfolio value over 90 days.

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

Indian Overseas Bank  vs.  Bodhi Tree Multimedia

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bodhi Tree Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodhi Tree Multimedia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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 Indian Overseas and Bodhi Tree

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

The idea behind Indian Overseas Bank and Bodhi Tree Multimedia 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.