Correlation Between Home First and KIOCL

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

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

Diversification Opportunities for Home First and KIOCL

0.57

Correlation Coefficient

Home First  KIOCL

Very weak diversification

The 3 months correlation between Home and KIOCL is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Home First Finance and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Home First 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 Home First Finance 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 Home First i.e., Home First and KIOCL go up and down completely randomly.

Pair Corralation between Home First and KIOCL

Assuming the 90 days trading horizon Home First Finance is expected to generate 0.69 times more return on investment than KIOCL. However, Home First Finance is 1.44 times less risky than KIOCL. It trades about 0.07 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.13 per unit of risk. If you would invest  100,380  in Home First Finance on December 24, 2024 and sell it today you would earn a total of  9,935  from holding Home First Finance or generate 9.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Home First Finance  vs.  KIOCL Limited

Home First Finance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Home First Finance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Home First may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 uncertain 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 Home First and KIOCL

The main advantage of trading using opposite Home First and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home First 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 Home First Finance 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.