Correlation Between Hindcon Chemicals and KIOCL

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

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

Diversification Opportunities for Hindcon Chemicals and KIOCL

0.11

Correlation Coefficient

Hindcon Chemicals  KIOCL

Average diversification

The 3 months correlation between Hindcon and KIOCL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hindcon Chemicals Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Hindcon Chemicals 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 Hindcon Chemicals 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 Hindcon Chemicals i.e., Hindcon Chemicals and KIOCL go up and down completely randomly.

Pair Corralation between Hindcon Chemicals and KIOCL

Assuming the 90 days trading horizon Hindcon Chemicals Limited is expected to generate 4.93 times more return on investment than KIOCL. However, Hindcon Chemicals is 4.93 times more volatile than KIOCL Limited. It trades about 0.05 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.05 per unit of risk. If you would invest  1,731  in Hindcon Chemicals Limited on October 25, 2024 and sell it today you would earn a total of  2,368  from holding Hindcon Chemicals Limited or generate 136.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Hindcon Chemicals Limited  vs.  KIOCL Limited

Hindcon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hindcon Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Hindcon Chemicals is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

KIOCL Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hindcon Chemicals and KIOCL

The main advantage of trading using opposite Hindcon Chemicals and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hindcon Chemicals 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 Hindcon Chemicals 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.