Correlation Between Patanjali Foods and Indian Oil

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

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

Diversification Opportunities for Patanjali Foods and Indian Oil

-0.71

Correlation Coefficient

Patanjali Foods  Indian Oil

Pay attention - limited upside

The 3 months correlation between Patanjali and Indian is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Patanjali Foods Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and Patanjali Foods 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 Patanjali Foods Limited are associated (or correlated) with Indian Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Oil has no effect on the direction of Patanjali Foods i.e., Patanjali Foods and Indian Oil go up and down completely randomly.

Pair Corralation between Patanjali Foods and Indian Oil

Assuming the 90 days trading horizon Patanjali Foods is expected to generate 1.14 times less return on investment than Indian Oil. In addition to that, Patanjali Foods is 1.05 times more volatile than Indian Oil. It trades about 0.06 of its total potential returns per unit of risk. Indian Oil is currently generating about 0.07 per unit of volatility. If you would invest  8,616  in Indian Oil on September 30, 2024 and sell it today you would earn a total of  5,009  from holding Indian Oil or generate 58.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.73%
Values	Daily Returns

Patanjali Foods Limited  vs.  Indian Oil

Patanjali Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patanjali Foods Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Patanjali Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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.

Pair Trading with Patanjali Foods and Indian Oil

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

The idea behind Patanjali Foods Limited and Indian Oil 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.