Correlation Between HMT and Kilitch Drugs

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

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

Diversification Opportunities for HMT and Kilitch Drugs

0.25

Correlation Coefficient

HMT  Kilitch Drugs

Modest diversification

The 3 months correlation between HMT and Kilitch is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and Kilitch Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilitch Drugs Limited and HMT 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 HMT Limited are associated (or correlated) with Kilitch Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilitch Drugs Limited has no effect on the direction of HMT i.e., HMT and Kilitch Drugs go up and down completely randomly.

Pair Corralation between HMT and Kilitch Drugs

Assuming the 90 days trading horizon HMT Limited is expected to under-perform the Kilitch Drugs. In addition to that, HMT is 1.15 times more volatile than Kilitch Drugs Limited. It trades about -0.13 of its total potential returns per unit of risk. Kilitch Drugs Limited is currently generating about 0.07 per unit of volatility. If you would invest  32,585  in Kilitch Drugs Limited on December 25, 2024 and sell it today you would earn a total of  2,880  from holding Kilitch Drugs Limited or generate 8.84% return on investment over 90 days.

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

HMT Limited  vs.  Kilitch Drugs Limited

HMT Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HMT 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kilitch Drugs Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kilitch Drugs Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Kilitch Drugs may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HMT and Kilitch Drugs

The main advantage of trading using opposite HMT and Kilitch Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMT position performs unexpectedly, Kilitch Drugs 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 Kilitch Drugs will offset losses from the drop in Kilitch Drugs' long position.

The idea behind HMT Limited and Kilitch Drugs 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.