Correlation Between Indian Oil and Godrej Agrovet

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

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

Diversification Opportunities for Indian Oil and Godrej Agrovet

0.59

Correlation Coefficient

Indian Oil  Godrej Agrovet

Very weak diversification

The 3 months correlation between Indian and Godrej is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Godrej Agrovet Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Godrej Agrovet 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 Godrej Agrovet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Godrej Agrovet has no effect on the direction of Indian Oil i.e., Indian Oil and Godrej Agrovet go up and down completely randomly.

Pair Corralation between Indian Oil and Godrej Agrovet

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Godrej Agrovet. In addition to that, Indian Oil is 1.03 times more volatile than Godrej Agrovet Limited. It trades about -0.17 of its total potential returns per unit of risk. Godrej Agrovet Limited is currently generating about -0.01 per unit of volatility. If you would invest  79,545  in Godrej Agrovet Limited on September 13, 2024 and sell it today you would lose (1,510) from holding Godrej Agrovet Limited or give up 1.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Indian Oil  vs.  Godrej Agrovet Limited

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 uncertain 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.

Godrej Agrovet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Godrej Agrovet Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Godrej Agrovet is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Indian Oil and Godrej Agrovet

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

The idea behind Indian Oil and Godrej Agrovet 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.