Correlation Between KIOCL and HDFC Life

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

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

Diversification Opportunities for KIOCL and HDFC Life

-0.41

Correlation Coefficient

KIOCL  HDFC Life

Very good diversification

The 3 months correlation between KIOCL and HDFC is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and HDFC Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Life Insurance 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 HDFC Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Life Insurance has no effect on the direction of KIOCL i.e., KIOCL and HDFC Life go up and down completely randomly.

Pair Corralation between KIOCL and HDFC Life

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 4.22 times more return on investment than HDFC Life. However, KIOCL is 4.22 times more volatile than HDFC Life Insurance. It trades about 0.1 of its potential returns per unit of risk. HDFC Life Insurance is currently generating about -0.28 per unit of risk. If you would invest  34,290  in KIOCL Limited on October 7, 2024 and sell it today you would earn a total of  5,470  from holding KIOCL Limited or generate 15.95% return on investment over 90 days.

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

KIOCL Limited  vs.  HDFC Life Insurance

KIOCL Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

HDFC Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HDFC Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KIOCL and HDFC Life

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

The idea behind KIOCL Limited and HDFC Life Insurance 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.