Correlation Between Global Health and Kilitch Drugs

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

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

Diversification Opportunities for Global Health and Kilitch Drugs

-0.11

Correlation Coefficient

Global Health  Kilitch Drugs

Good diversification

The 3 months correlation between Global and Kilitch is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Global Health Limited and Kilitch Drugs Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilitch Drugs Limited and Global Health 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 Global Health Limited are associated (or correlated) with Kilitch Drugs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilitch Drugs Limited has no effect on the direction of Global Health i.e., Global Health and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Global Health and Kilitch Drugs

Assuming the 90 days trading horizon Global Health Limited is expected to generate 0.76 times more return on investment than Kilitch Drugs. However, Global Health Limited is 1.32 times less risky than Kilitch Drugs. It trades about 0.1 of its potential returns per unit of risk. Kilitch Drugs Limited is currently generating about 0.07 per unit of risk. If you would invest  45,710  in Global Health Limited on September 29, 2024 and sell it today you would earn a total of  63,330  from holding Global Health Limited or generate 138.55% return on investment over 90 days.

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

Global Health Limited  vs.  Kilitch Drugs Limited

Global Health Limited

Risk-Adjusted Performance

5 of 100

Modest

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

Kilitch Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kilitch Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Kilitch Drugs is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Global Health and Kilitch Drugs

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

The idea behind Global Health Limited and Kilitch Drugs 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.