Correlation Between Khaitan Chemicals and Beta Drugs

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

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

Diversification Opportunities for Khaitan Chemicals and Beta Drugs

0.77

Correlation Coefficient

Khaitan Chemicals  Beta Drugs

Poor diversification

The 3 months correlation between Khaitan and Beta is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Khaitan Chemicals Fertilizers and Beta Drugs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Drugs and Khaitan Chemicals 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 Khaitan Chemicals Fertilizers are associated (or correlated) with Beta Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Drugs has no effect on the direction of Khaitan Chemicals i.e., Khaitan Chemicals and Beta Drugs go up and down completely randomly.

Pair Corralation between Khaitan Chemicals and Beta Drugs

Assuming the 90 days trading horizon Khaitan Chemicals Fertilizers is expected to under-perform the Beta Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Khaitan Chemicals Fertilizers is 1.18 times less risky than Beta Drugs. The stock trades about -0.14 of its potential returns per unit of risk. The Beta Drugs is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  194,885  in Beta Drugs on December 24, 2024 and sell it today you would lose (2,380) from holding Beta Drugs or give up 1.22% of portfolio value over 90 days.

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

Khaitan Chemicals Fertilizers  vs.  Beta Drugs

Khaitan Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Khaitan Chemicals Fertilizers 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 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.

Beta Drugs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beta Drugs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Beta Drugs is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Khaitan Chemicals and Beta Drugs

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

The idea behind Khaitan Chemicals Fertilizers and Beta Drugs 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.