Correlation Between IOC and SLS

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

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

Diversification Opportunities for IOC and SLS

1.0

Correlation Coefficient

IOC  SLS

No risk reduction

The 3 months correlation between IOC and SLS is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding IOC and SLS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLS and IOC 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 IOC are associated (or correlated) with SLS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLS has no effect on the direction of IOC i.e., IOC and SLS go up and down completely randomly.

Pair Corralation between IOC and SLS

Assuming the 90 days trading horizon IOC is expected to generate 1.01 times more return on investment than SLS. However, IOC is 1.01 times more volatile than SLS. It trades about 0.1 of its potential returns per unit of risk. SLS is currently generating about 0.09 per unit of risk. If you would invest  1.39  in IOC on May 18, 2025 and sell it today you would earn a total of  0.15  from holding IOC or generate 10.79% return on investment over 90 days.

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

IOC  vs.  SLS

IOC

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in IOC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, IOC may actually be approaching a critical reversion point that can send shares even higher in September 2025.

SLS

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SLS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SLS may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with IOC and SLS

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

The idea behind IOC and SLS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.