Correlation Between Raj Rayon and KIOCL

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

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

Diversification Opportunities for Raj Rayon and KIOCL

0.77

Correlation Coefficient

Raj Rayon  KIOCL

Poor diversification

The 3 months correlation between Raj and KIOCL is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Raj Rayon Industries and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Raj Rayon 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 Raj Rayon Industries are associated (or correlated) with KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of Raj Rayon i.e., Raj Rayon and KIOCL go up and down completely randomly.

Pair Corralation between Raj Rayon and KIOCL

Assuming the 90 days trading horizon Raj Rayon Industries is expected to under-perform the KIOCL. But the stock apears to be less risky and, when comparing its historical volatility, Raj Rayon Industries is 2.38 times less risky than KIOCL. The stock trades about -0.2 of its potential returns per unit of risk. The KIOCL Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  40,730  in KIOCL Limited on September 5, 2024 and sell it today you would lose (3,660) from holding KIOCL Limited or give up 8.99% of portfolio value over 90 days.

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

Raj Rayon Industries  vs.  KIOCL Limited

Raj Rayon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KIOCL Limited

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, KIOCL is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Raj Rayon and KIOCL

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

The idea behind Raj Rayon Industries and KIOCL 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.