Correlation Between Exide Industries and KIOCL

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

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

Diversification Opportunities for Exide Industries and KIOCL

0.63

Correlation Coefficient

Exide Industries  KIOCL

Poor diversification

The 3 months correlation between Exide and KIOCL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Exide Industries Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Exide Industries 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 Exide Industries Limited 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 Exide Industries i.e., Exide Industries and KIOCL go up and down completely randomly.

Pair Corralation between Exide Industries and KIOCL

Assuming the 90 days trading horizon Exide Industries Limited is expected to generate 0.56 times more return on investment than KIOCL. However, Exide Industries Limited is 1.79 times less risky than KIOCL. It trades about -0.1 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.13 per unit of risk. If you would invest  41,535  in Exide Industries Limited on November 20, 2024 and sell it today you would lose (5,355) from holding Exide Industries Limited or give up 12.89% of portfolio value over 90 days.

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

Exide Industries Limited  vs.  KIOCL Limited

Exide Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exide Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

KIOCL Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days KIOCL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Exide Industries and KIOCL

The main advantage of trading using opposite Exide Industries and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exide Industries 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 Exide Industries Limited 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.