Correlation Between PURA and IOC

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

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

Diversification Opportunities for PURA and IOC

0.61

Correlation Coefficient

PURA  IOC

Poor diversification

The 3 months correlation between PURA and IOC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding PURA and IOC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IOC and PURA 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 PURA are associated (or correlated) with IOC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IOC has no effect on the direction of PURA i.e., PURA and IOC go up and down completely randomly.

Pair Corralation between PURA and IOC

If you would invest  0.75  in IOC on September 2, 2024 and sell it today you would earn a total of  0.50  from holding IOC or generate 67.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.52%
Values	Daily Returns

PURA  vs.  IOC

PURA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PURA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, PURA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

IOC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IOC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, IOC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PURA and IOC

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

The idea behind PURA and IOC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.