Correlation Between Embassy Office and KIOCL

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

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

Diversification Opportunities for Embassy Office and KIOCL

-0.49

Correlation Coefficient

Embassy Office  KIOCL

Very good diversification

The 3 months correlation between Embassy and KIOCL is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Office Parks and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Embassy Office 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 Embassy Office Parks are associated (or correlated) with KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of Embassy Office i.e., Embassy Office and KIOCL go up and down completely randomly.

Pair Corralation between Embassy Office and KIOCL

Assuming the 90 days trading horizon Embassy Office Parks is expected to under-perform the KIOCL. But the stock apears to be less risky and, when comparing its historical volatility, Embassy Office Parks is 3.29 times less risky than KIOCL. The stock trades about -0.05 of its potential returns per unit of risk. The KIOCL Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  35,910  in KIOCL Limited on October 21, 2024 and sell it today you would earn a total of  970.00  from holding KIOCL Limited or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Embassy Office Parks  vs.  KIOCL Limited

Embassy Office Parks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embassy Office Parks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Embassy Office is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

KIOCL Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, KIOCL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Embassy Office and KIOCL

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

The idea behind Embassy Office Parks and KIOCL 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.