Correlation Between Thomas Scott and Indian Oil

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

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

Diversification Opportunities for Thomas Scott and Indian Oil

0.35

Correlation Coefficient

Thomas Scott  Indian Oil

Weak diversification

The 3 months correlation between Thomas and Indian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Thomas Scott Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and Thomas Scott 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 Thomas Scott 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 Thomas Scott i.e., Thomas Scott and Indian Oil go up and down completely randomly.

Pair Corralation between Thomas Scott and Indian Oil

Assuming the 90 days trading horizon Thomas Scott Limited is expected to generate 2.08 times more return on investment than Indian Oil. However, Thomas Scott is 2.08 times more volatile than Indian Oil. It trades about 0.17 of its potential returns per unit of risk. Indian Oil is currently generating about -0.17 per unit of risk. If you would invest  24,400  in Thomas Scott Limited on September 14, 2024 and sell it today you would earn a total of  9,620  from holding Thomas Scott Limited or generate 39.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Thomas Scott Limited  vs.  Indian Oil

Thomas Scott Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Thomas Scott and Indian Oil

The main advantage of trading using opposite Thomas Scott and Indian Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thomas Scott 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 Thomas Scott 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.