Correlation Between KIOCL and GTL

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

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

Diversification Opportunities for KIOCL and GTL

0.96

Correlation Coefficient

KIOCL  GTL

Almost no diversification

The 3 months correlation between KIOCL and GTL is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and GTL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GTL Limited and KIOCL 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 KIOCL Limited are associated (or correlated) with GTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GTL Limited has no effect on the direction of KIOCL i.e., KIOCL and GTL go up and down completely randomly.

Pair Corralation between KIOCL and GTL

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 1.33 times more return on investment than GTL. However, KIOCL is 1.33 times more volatile than GTL Limited. It trades about -0.14 of its potential returns per unit of risk. GTL Limited is currently generating about -0.21 per unit of risk. If you would invest  34,480  in KIOCL Limited on December 30, 2024 and sell it today you would lose (10,803) from holding KIOCL Limited or give up 31.33% of portfolio value over 90 days.

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

KIOCL Limited  vs.  GTL Limited

KIOCL Limited

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

GTL Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days GTL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with KIOCL and GTL

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

The idea behind KIOCL Limited and GTL 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.