Correlation Between KIOCL and Hindcon Chemicals

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

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

Diversification Opportunities for KIOCL and Hindcon Chemicals

0.88

Correlation Coefficient

KIOCL  Hindcon Chemicals

Very poor diversification

The 3 months correlation between KIOCL and Hindcon is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and Hindcon Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindcon Chemicals 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 Hindcon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindcon Chemicals has no effect on the direction of KIOCL i.e., KIOCL and Hindcon Chemicals go up and down completely randomly.

Pair Corralation between KIOCL and Hindcon Chemicals

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 1.4 times more return on investment than Hindcon Chemicals. However, KIOCL is 1.4 times more volatile than Hindcon Chemicals Limited. It trades about -0.13 of its potential returns per unit of risk. Hindcon Chemicals Limited is currently generating about -0.19 per unit of risk. If you would invest  36,190  in KIOCL Limited on December 24, 2024 and sell it today you would lose (10,367) from holding KIOCL Limited or give up 28.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

KIOCL Limited  vs.  Hindcon Chemicals 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.

Hindcon Chemicals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KIOCL and Hindcon Chemicals

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

The idea behind KIOCL Limited and Hindcon Chemicals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.