Correlation Between INDIKA ENERGY and CHINA EAST

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

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

Diversification Opportunities for INDIKA ENERGY and CHINA EAST

0.66

Correlation Coefficient

INDIKA ENERGY  CHINA EAST

Poor diversification

The 3 months correlation between INDIKA and CHINA is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and CHINA EAST ED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA EAST ED and INDIKA ENERGY 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 INDIKA ENERGY are associated (or correlated) with CHINA EAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA EAST ED has no effect on the direction of INDIKA ENERGY i.e., INDIKA ENERGY and CHINA EAST go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and CHINA EAST

Assuming the 90 days trading horizon INDIKA ENERGY is expected to generate 1.87 times less return on investment than CHINA EAST. But when comparing it to its historical volatility, INDIKA ENERGY is 3.89 times less risky than CHINA EAST. It trades about 0.2 of its potential returns per unit of risk. CHINA EAST ED is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  59.00  in CHINA EAST ED on April 20, 2025 and sell it today you would earn a total of  20.00  from holding CHINA EAST ED or generate 33.9% return on investment over 90 days.

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

INDIKA ENERGY  vs.  CHINA EAST ED

INDIKA ENERGY

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INDIKA ENERGY are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, INDIKA ENERGY unveiled solid returns over the last few months and may actually be approaching a breakup point.

CHINA EAST ED

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA EAST ED are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CHINA EAST reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDIKA ENERGY and CHINA EAST

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

The idea behind INDIKA ENERGY and CHINA EAST ED 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.