Correlation Between Kilitch Drugs and Reliance Infrastructure

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

Diversification Opportunities for Kilitch Drugs and Reliance Infrastructure

0.5

Correlation Coefficient

Kilitch Drugs  Reliance Infrastructure

Very weak diversification

The 3 months correlation between Kilitch and Reliance is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Kilitch Drugs Limited and Reliance Infrastructure Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Infrastructure 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 Reliance Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Infrastructure has no effect on the direction of Kilitch Drugs i.e., Kilitch Drugs and Reliance Infrastructure go up and down completely randomly.

Pair Corralation between Kilitch Drugs and Reliance Infrastructure

Assuming the 90 days trading horizon Kilitch Drugs Limited is expected to generate 0.87 times more return on investment than Reliance Infrastructure. However, Kilitch Drugs Limited is 1.14 times less risky than Reliance Infrastructure. It trades about 0.07 of its potential returns per unit of risk. Reliance Infrastructure Limited is currently generating about 0.01 per unit of risk. If you would invest  30,450  in Kilitch Drugs Limited on October 26, 2024 and sell it today you would earn a total of  2,580  from holding Kilitch Drugs Limited or generate 8.47% 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.  Reliance Infrastructure Limite

Kilitch Drugs Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kilitch Drugs Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Kilitch Drugs may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Reliance Infrastructure

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reliance Infrastructure Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Reliance Infrastructure is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kilitch Drugs and Reliance Infrastructure

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

The idea behind Kilitch Drugs Limited and Reliance Infrastructure 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.