Don't buy HINDPETRO now, it is a high risk investment

HINDUSTAN PETROLEUM CORP was among the worst performers today. It lost -1.92% to close at 239.5. It's recent 5 day performance has been +1.5%, -0.39%, +3.25%, +0.19% and +0.26%.

[Themes containing HINDPETRO]

HINDPETRO showed a strong up trend over the last 3 months. During this period HINDPETRO gained +10.93% and saw a maximum drawdown of -11.96%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in HINDPETRO till volatility reduces and a clear trend emerges.

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HINDPETRO has been underperforming the NIFTY-50 index in recent time, after having outperformed till 31 Aug, 2017. Over the last 3 years and 1 month, HINDPETRO outperformed the NIFTY-50 index on 51% days.

HINDPETRO was profitable on 52% days in the last three months. During this time, it delivered on average +0.2% per day. It delivered it's best daily return of +6.82%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bearish trend during this period which started on 5 Dec, 2018 and went on till 7 Dec, 2018. The trend delivered -1.49% losses to investors. This was followed by a bullish trend that started on 13 Dec, 2018 and ended on 21 Dec, 2018. This bullish trend delivered +13.27% to investors.

HINDPETRO had 4 profitable and 8 loss making months over the last year. During the last year, HINDPETRO underperformed NIFTY-50 index on monthly return basis. HINDPETRO was also a more risky investment than NIFTY-50 index as it's worst month in the last year, Jun 2018, returned -16.21% compared to -6.42% returned by NIFTY-50 index in Sep 2018. HINDPETRO had a longer winning streak of losing months than NIFTY-50 index. It went down in 3 straight months (from Feb 2018 to Apr 2018) during which period it delivered -21.85%.

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HINDPETRO is becoming less volatile overall. In comparison, the NIFTY-50 index is seeing a fall in volatility. During the last three months, there was a significant fall in HINDPETRO's volatility from 24 Oct, 2018 to 14 Jan, 2019. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that HINDPETRO has significant positive skewness in it's return distribution. This indicates that investors can expect HINDPETRO to recover from drawdowns quickly. Which makes HINDPETRO a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in HINDPETRO derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.

NIFTY-50 index has more chance of extreme outcomes than HINDPETRO. Therefore, NIFTY-50 must receive a lower allocation than HINDPETRO in your portfolio. HINDPETRO usually has shorter drawdown period than the NIFTY-50 index.

On a general note (since you are interested in HINDPETRO), three instruments that have performed similar to HINDPETRO are FEDERALBNK, SURYAROSNI and SALASAR. They must all be evaluated as alternative investment options and for diversification.