Correlation Between Indian Oil and Motilal Oswal

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

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

Diversification Opportunities for Indian Oil and Motilal Oswal

-0.77

Correlation Coefficient

Indian Oil  Motilal Oswal

Pay attention - limited upside

The 3 months correlation between Indian and Motilal is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Motilal Oswal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motilal Oswal Financial 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 Motilal Oswal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motilal Oswal Financial has no effect on the direction of Indian Oil i.e., Indian Oil and Motilal Oswal go up and down completely randomly.

Pair Corralation between Indian Oil and Motilal Oswal

Assuming the 90 days trading horizon Indian Oil is expected to generate 7.22 times less return on investment than Motilal Oswal. But when comparing it to its historical volatility, Indian Oil is 7.79 times less risky than Motilal Oswal. It trades about 0.08 of its potential returns per unit of risk. Motilal Oswal Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  18,526  in Motilal Oswal Financial on September 12, 2024 and sell it today you would earn a total of  79,129  from holding Motilal Oswal Financial or generate 427.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.42%
Values	Daily Returns

Indian Oil  vs.  Motilal Oswal Financial

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.

Motilal Oswal Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motilal Oswal Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Motilal Oswal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indian Oil and Motilal Oswal

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

The idea behind Indian Oil and Motilal Oswal Financial 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.