Correlation Between Hi Tech and KIOCL

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

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

Diversification Opportunities for Hi Tech and KIOCL

0.72

Correlation Coefficient

Hi Tech  KIOCL

Poor diversification

The 3 months correlation between HITECHGEAR and KIOCL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Hi Tech Gears and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Hi Tech 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 The Hi Tech Gears 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 Hi Tech i.e., Hi Tech and KIOCL go up and down completely randomly.

Pair Corralation between Hi Tech and KIOCL

Assuming the 90 days trading horizon The Hi Tech Gears is expected to generate 0.66 times more return on investment than KIOCL. However, The Hi Tech Gears is 1.52 times less risky than KIOCL. It trades about 0.0 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.01 per unit of risk. If you would invest  87,806  in The Hi Tech Gears on September 13, 2024 and sell it today you would lose (1,131) from holding The Hi Tech Gears or give up 1.29% of portfolio value over 90 days.

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

The Hi Tech Gears  vs.  KIOCL Limited

Hi Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hi Tech Gears has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Hi Tech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

KIOCL Limited

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, KIOCL is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hi Tech and KIOCL

The main advantage of trading using opposite Hi Tech and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hi Tech 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 The Hi Tech Gears 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.