Correlation Between HMT and KIOCL

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

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

Diversification Opportunities for HMT and KIOCL

0.93

Correlation Coefficient

HMT  KIOCL

Almost no diversification

The 3 months correlation between HMT and KIOCL is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL 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 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 HMT i.e., HMT and KIOCL go up and down completely randomly.

Pair Corralation between HMT and KIOCL

Assuming the 90 days trading horizon HMT Limited is expected to generate 0.72 times more return on investment than KIOCL. However, HMT Limited is 1.39 times less risky than KIOCL. It trades about -0.15 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.14 per unit of risk. If you would invest  6,334  in HMT Limited on December 29, 2024 and sell it today you would lose (1,565) from holding HMT Limited or give up 24.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

HMT Limited  vs.  KIOCL 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 unsteady 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.

KIOCL Limited

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HMT and KIOCL

The main advantage of trading using opposite HMT and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMT 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 HMT 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.