Correlation Between Kilitch Drugs and KIOCL

Can any of the company-specific risk be diversified away by investing in both Kilitch Drugs 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 Kilitch Drugs and KIOCL 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 KIOCL Limited, you can compare the effects of market volatilities on Kilitch Drugs 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 Kilitch Drugs with a short position of KIOCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kilitch Drugs and KIOCL.

Diversification Opportunities for Kilitch Drugs and KIOCL

0.59

Correlation Coefficient

Kilitch Drugs  KIOCL

Very weak diversification

The 3 months correlation between Kilitch and KIOCL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kilitch Drugs Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited 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 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 Kilitch Drugs i.e., Kilitch Drugs and KIOCL go up and down completely randomly.

Pair Corralation between Kilitch Drugs and KIOCL

Assuming the 90 days trading horizon Kilitch Drugs is expected to generate 1.23 times less return on investment than KIOCL. But when comparing it to its historical volatility, Kilitch Drugs Limited is 1.51 times less risky than KIOCL. It trades about 0.14 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  34,330  in KIOCL Limited on September 23, 2024 and sell it today you would earn a total of  1,790  from holding KIOCL Limited or generate 5.21% return on investment over 90 days.

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

Kilitch Drugs Limited  vs.  KIOCL 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 latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

KIOCL Limited

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, KIOCL is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kilitch Drugs and KIOCL

The main advantage of trading using opposite Kilitch Drugs and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kilitch Drugs 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 Kilitch Drugs 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.