Correlation Between REC and Indian Oil

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

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

Diversification Opportunities for REC and Indian Oil

-0.41

Correlation Coefficient

REC  Indian Oil

Very good diversification

The 3 months correlation between REC and Indian is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited and Indian Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indian Oil and REC 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 REC 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 REC i.e., REC and Indian Oil go up and down completely randomly.

Pair Corralation between REC and Indian Oil

Assuming the 90 days trading horizon REC Limited is expected to under-perform the Indian Oil. In addition to that, REC is 1.3 times more volatile than Indian Oil. It trades about -0.07 of its total potential returns per unit of risk. Indian Oil is currently generating about 0.09 per unit of volatility. If you would invest  13,845  in Indian Oil on April 20, 2025 and sell it today you would earn a total of  1,161  from holding Indian Oil or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

REC Limited  vs.  Indian Oil

REC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days REC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Indian Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Oil 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, Indian Oil may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with REC and Indian Oil

The main advantage of trading using opposite REC and Indian Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC 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 REC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.