Correlation Between Future Retail and KIOCL

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

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

Diversification Opportunities for Future Retail and KIOCL

0.0

Correlation Coefficient

Future Retail  KIOCL

Pay attention - limited upside

The 3 months correlation between Future and KIOCL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Future Retail Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Future Retail 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 Future Retail 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 Future Retail i.e., Future Retail and KIOCL go up and down completely randomly.

Pair Corralation between Future Retail and KIOCL

Assuming the 90 days trading horizon Future Retail Limited is expected to under-perform the KIOCL. But the stock apears to be less risky and, when comparing its historical volatility, Future Retail Limited is 1.46 times less risky than KIOCL. The stock trades about -0.02 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  20,035  in KIOCL Limited on October 6, 2024 and sell it today you would earn a total of  19,725  from holding KIOCL Limited or generate 98.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	88.89%
Values	Daily Returns

Future Retail Limited  vs.  KIOCL Limited

Future Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Future Retail is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 fragile basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Retail and KIOCL

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

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.