Correlation Between Fine Organic and KIOCL

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

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

Diversification Opportunities for Fine Organic and KIOCL

0.17

Correlation Coefficient

Fine Organic  KIOCL

Average diversification

The 3 months correlation between Fine and KIOCL is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fine Organic Industries and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Fine Organic 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 Fine Organic Industries 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 Fine Organic i.e., Fine Organic and KIOCL go up and down completely randomly.

Pair Corralation between Fine Organic and KIOCL

Assuming the 90 days trading horizon Fine Organic Industries is expected to under-perform the KIOCL. But the stock apears to be less risky and, when comparing its historical volatility, Fine Organic Industries is 2.38 times less risky than KIOCL. The stock trades about -0.31 of its potential returns per unit of risk. The KIOCL Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  38,515  in KIOCL Limited on October 8, 2024 and sell it today you would earn a total of  1,245  from holding KIOCL Limited or generate 3.23% return on investment over 90 days.

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

Fine Organic Industries  vs.  KIOCL Limited

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

KIOCL Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fine Organic and KIOCL

The main advantage of trading using opposite Fine Organic and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fine Organic 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 Fine Organic Industries 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..