Correlation Between Indian Oil and Eastern Silk

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

By analyzing existing cross correlation between Indian Oil and Eastern Silk Industries, you can compare the effects of market volatilities on Indian Oil and Eastern Silk 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 Eastern Silk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indian Oil and Eastern Silk.

Diversification Opportunities for Indian Oil and Eastern Silk

0.0

Correlation Coefficient

Indian Oil  Eastern Silk

Pay attention - limited upside

The 3 months correlation between Indian and Eastern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Eastern Silk Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Silk Industries 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 Eastern Silk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Silk Industries has no effect on the direction of Indian Oil i.e., Indian Oil and Eastern Silk go up and down completely randomly.

Pair Corralation between Indian Oil and Eastern Silk

Assuming the 90 days trading horizon Indian Oil is expected to generate 1.02 times more return on investment than Eastern Silk. However, Indian Oil is 1.02 times more volatile than Eastern Silk Industries. It trades about 0.08 of its potential returns per unit of risk. Eastern Silk Industries is currently generating about -0.02 per unit of risk. If you would invest  7,966  in Indian Oil on September 19, 2024 and sell it today you would earn a total of  6,066  from holding Indian Oil or generate 76.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	85.79%
Values	Daily Returns

Indian Oil  vs.  Eastern Silk Industries

Indian Oil

Risk-Adjusted Performance

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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.

Eastern Silk Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Silk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Eastern Silk is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Indian Oil and Eastern Silk

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

The idea behind Indian Oil and Eastern Silk Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..