Correlation Between Kilitch Drugs and Bigbloc Construction

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

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

Diversification Opportunities for Kilitch Drugs and Bigbloc Construction

0.18

Correlation Coefficient

Kilitch Drugs  Bigbloc Construction

Average diversification

The 3 months correlation between Kilitch and Bigbloc is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Kilitch Drugs Limited and Bigbloc Construction Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bigbloc Construction and Kilitch Drugs 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 Kilitch Drugs Limited are associated (or correlated) with Bigbloc Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bigbloc Construction has no effect on the direction of Kilitch Drugs i.e., Kilitch Drugs and Bigbloc Construction go up and down completely randomly.

Pair Corralation between Kilitch Drugs and Bigbloc Construction

Assuming the 90 days trading horizon Kilitch Drugs is expected to generate 1.88 times less return on investment than Bigbloc Construction. But when comparing it to its historical volatility, Kilitch Drugs Limited is 2.93 times less risky than Bigbloc Construction. It trades about 0.07 of its potential returns per unit of risk. Bigbloc Construction Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,731  in Bigbloc Construction Limited on September 28, 2024 and sell it today you would earn a total of  3,612  from holding Bigbloc Construction Limited or generate 53.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Kilitch Drugs Limited  vs.  Bigbloc Construction Limited

Kilitch Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kilitch Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Kilitch Drugs is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Bigbloc Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bigbloc Construction Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kilitch Drugs and Bigbloc Construction

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

The idea behind Kilitch Drugs Limited and Bigbloc Construction 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.