Correlation Between Indian Oil and Dev Information

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

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

Diversification Opportunities for Indian Oil and Dev Information

-0.57

Correlation Coefficient

Indian Oil  Dev Information

Excellent diversification

The 3 months correlation between Indian and Dev is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Dev Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dev Information Tech and Indian Oil 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 Oil are associated (or correlated) with Dev Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dev Information Tech has no effect on the direction of Indian Oil i.e., Indian Oil and Dev Information go up and down completely randomly.

Pair Corralation between Indian Oil and Dev Information

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Dev Information. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 2.16 times less risky than Dev Information. The stock trades about -0.18 of its potential returns per unit of risk. The Dev Information Technology is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,820  in Dev Information Technology on September 13, 2024 and sell it today you would earn a total of  2,456  from holding Dev Information Technology or generate 19.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Indian Oil  vs.  Dev Information Technology

Indian Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indian Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Dev Information Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dev Information Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Dev Information displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Dev Information

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

The idea behind Indian Oil and Dev Information Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.