Correlation Between Indian Oil and Shemaroo Entertainment

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

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

Diversification Opportunities for Indian Oil and Shemaroo Entertainment

0.75

Correlation Coefficient

Indian Oil  Shemaroo Entertainment

Poor diversification

The 3 months correlation between Indian and Shemaroo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Indian Oil and Shemaroo Entertainment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shemaroo Entertainment 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 Shemaroo Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shemaroo Entertainment has no effect on the direction of Indian Oil i.e., Indian Oil and Shemaroo Entertainment go up and down completely randomly.

Pair Corralation between Indian Oil and Shemaroo Entertainment

Assuming the 90 days trading horizon Indian Oil is expected to under-perform the Shemaroo Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Indian Oil is 2.21 times less risky than Shemaroo Entertainment. The stock trades about -0.22 of its potential returns per unit of risk. The Shemaroo Entertainment Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  16,134  in Shemaroo Entertainment Limited on September 2, 2024 and sell it today you would earn a total of  600.00  from holding Shemaroo Entertainment Limited or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Indian Oil  vs.  Shemaroo Entertainment 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 unsteady 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.

Shemaroo Entertainment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shemaroo Entertainment Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Shemaroo Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indian Oil and Shemaroo Entertainment

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

The idea behind Indian Oil and Shemaroo Entertainment 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.

Check out your portfolio center.

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.