Correlation Between Reliance Industries and Kilitch Drugs

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

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

Diversification Opportunities for Reliance Industries and Kilitch Drugs

0.22

Correlation Coefficient

Reliance Industries  Kilitch Drugs

Modest diversification

The 3 months correlation between Reliance and Kilitch is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries 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 Reliance Industries 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 Reliance Industries 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 Reliance Industries i.e., Reliance Industries and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Reliance Industries and Kilitch Drugs

Assuming the 90 days trading horizon Reliance Industries Limited is expected to under-perform the Kilitch Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Limited is 1.79 times less risky than Kilitch Drugs. The stock trades about -0.11 of its potential returns per unit of risk. The Kilitch Drugs Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  31,495  in Kilitch Drugs Limited on December 2, 2024 and sell it today you would lose (595.00) from holding Kilitch Drugs Limited or give up 1.89% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  Kilitch Drugs Limited

Reliance Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kilitch Drugs Limited

Risk-Adjusted Performance

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Reliance Industries and Kilitch Drugs

The main advantage of trading using opposite Reliance Industries and Kilitch Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.