Correlation Between Investment Trust and Indian Overseas

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

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

Diversification Opportunities for Investment Trust and Indian Overseas

-0.36

Correlation Coefficient

Investment Trust  Indian Overseas

Very good diversification

The 3 months correlation between Investment and Indian is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Investment Trust and Indian Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Overseas Bank and Investment Trust 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 The Investment Trust are associated (or correlated) with Indian Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indian Overseas Bank has no effect on the direction of Investment Trust i.e., Investment Trust and Indian Overseas go up and down completely randomly.

Pair Corralation between Investment Trust and Indian Overseas

Assuming the 90 days trading horizon The Investment Trust is expected to generate 1.09 times more return on investment than Indian Overseas. However, Investment Trust is 1.09 times more volatile than Indian Overseas Bank. It trades about 0.09 of its potential returns per unit of risk. Indian Overseas Bank is currently generating about -0.01 per unit of risk. If you would invest  18,600  in The Investment Trust on September 13, 2024 and sell it today you would earn a total of  2,533  from holding The Investment Trust or generate 13.62% return on investment over 90 days.

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

The Investment Trust  vs.  Indian Overseas Bank

Investment Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Investment Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Investment Trust exhibited solid returns over the last few months and may actually be approaching a breakup point.

Indian Overseas Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Investment Trust and Indian Overseas

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

The idea behind The Investment Trust and Indian Overseas Bank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.