Correlation Between Jindal Poly and KIOCL

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

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

Diversification Opportunities for Jindal Poly and KIOCL

0.25

Correlation Coefficient

Jindal Poly  KIOCL

Modest diversification

The 3 months correlation between Jindal and KIOCL is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Poly Investment and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Jindal Poly 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 Jindal Poly Investment 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 Jindal Poly i.e., Jindal Poly and KIOCL go up and down completely randomly.

Pair Corralation between Jindal Poly and KIOCL

Assuming the 90 days trading horizon Jindal Poly is expected to generate 3.89 times less return on investment than KIOCL. But when comparing it to its historical volatility, Jindal Poly Investment is 1.18 times less risky than KIOCL. It trades about 0.02 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  33,390  in KIOCL Limited on October 22, 2024 and sell it today you would earn a total of  3,490  from holding KIOCL Limited or generate 10.45% return on investment over 90 days.

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

Jindal Poly Investment  vs.  KIOCL Limited

Jindal Poly Investment

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jindal Poly Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Jindal Poly is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

KIOCL Limited

Risk-Adjusted Performance

4 of 100

Weak

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 Jindal Poly and KIOCL

The main advantage of trading using opposite Jindal Poly and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jindal Poly 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 Jindal Poly Investment 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.