Correlation Between Consolidated Construction and Kilitch Drugs

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

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

Diversification Opportunities for Consolidated Construction and Kilitch Drugs

0.19

Correlation Coefficient

Consolidated Construction  Kilitch Drugs

Average diversification

The 3 months correlation between Consolidated and Kilitch is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Construction Cons and Kilitch Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilitch Drugs Limited and Consolidated Construction 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 Consolidated Construction Consortium are associated (or correlated) with Kilitch Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilitch Drugs Limited has no effect on the direction of Consolidated Construction i.e., Consolidated Construction and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Consolidated Construction and Kilitch Drugs

Assuming the 90 days trading horizon Consolidated Construction Consortium is expected to generate 1.37 times more return on investment than Kilitch Drugs. However, Consolidated Construction is 1.37 times more volatile than Kilitch Drugs Limited. It trades about 0.21 of its potential returns per unit of risk. Kilitch Drugs Limited is currently generating about -0.02 per unit of risk. If you would invest  1,201  in Consolidated Construction Consortium on September 4, 2024 and sell it today you would earn a total of  699.00  from holding Consolidated Construction Consortium or generate 58.2% return on investment over 90 days.

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

Consolidated Construction Cons  vs.  Kilitch Drugs Limited

Consolidated Construction

Risk-Adjusted Performance

16 of 100

Solid

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

Kilitch Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kilitch Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Kilitch Drugs is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Consolidated Construction and Kilitch Drugs

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

The idea behind Consolidated Construction Consortium and Kilitch Drugs Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.