Correlation Between Oriental Carbon and Indo Borax

Can any of the company-specific risk be diversified away by investing in both Oriental Carbon and Indo Borax 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 Oriental Carbon and Indo Borax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oriental Carbon Chemicals and Indo Borax Chemicals, you can compare the effects of market volatilities on Oriental Carbon and Indo Borax 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 Oriental Carbon with a short position of Indo Borax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oriental Carbon and Indo Borax.

Diversification Opportunities for Oriental Carbon and Indo Borax

0.5

Correlation Coefficient

Oriental Carbon  Indo Borax

Very weak diversification

The 3 months correlation between Oriental and Indo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Oriental Carbon Chemicals and Indo Borax Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indo Borax Chemicals and Oriental Carbon 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 Oriental Carbon Chemicals are associated (or correlated) with Indo Borax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indo Borax Chemicals has no effect on the direction of Oriental Carbon i.e., Oriental Carbon and Indo Borax go up and down completely randomly.

Pair Corralation between Oriental Carbon and Indo Borax

Assuming the 90 days trading horizon Oriental Carbon Chemicals is expected to generate 0.64 times more return on investment than Indo Borax. However, Oriental Carbon Chemicals is 1.57 times less risky than Indo Borax. It trades about -0.02 of its potential returns per unit of risk. Indo Borax Chemicals is currently generating about -0.02 per unit of risk. If you would invest  26,285  in Oriental Carbon Chemicals on September 5, 2024 and sell it today you would lose (1,212) from holding Oriental Carbon Chemicals or give up 4.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Oriental Carbon Chemicals  vs.  Indo Borax Chemicals

Oriental Carbon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oriental Carbon Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Oriental Carbon is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Indo Borax Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indo Borax Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Indo Borax is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Oriental Carbon and Indo Borax

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

The idea behind Oriental Carbon Chemicals and Indo Borax Chemicals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.