Correlation Between KIOCL and Home First

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

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

Diversification Opportunities for KIOCL and Home First

-0.25

Correlation Coefficient

KIOCL  Home First

Very good diversification

The 3 months correlation between KIOCL and Home is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and Home First Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home First Finance 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 Home First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home First Finance has no effect on the direction of KIOCL i.e., KIOCL and Home First go up and down completely randomly.

Pair Corralation between KIOCL and Home First

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 1.85 times more return on investment than Home First. However, KIOCL is 1.85 times more volatile than Home First Finance. It trades about 0.07 of its potential returns per unit of risk. Home First Finance is currently generating about -0.09 per unit of risk. If you would invest  34,715  in KIOCL Limited on October 7, 2024 and sell it today you would earn a total of  5,045  from holding KIOCL Limited or generate 14.53% return on investment over 90 days.

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

KIOCL Limited  vs.  Home First Finance

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.

Home First Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home First Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with KIOCL and Home First

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

The idea behind KIOCL Limited and Home First Finance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.