Correlation Between SIL Investments and KIOCL

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

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

Diversification Opportunities for SIL Investments and KIOCL

-0.02

Correlation Coefficient

SIL Investments  KIOCL

Good diversification

The 3 months correlation between SIL and KIOCL is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SIL Investments Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and SIL Investments 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 SIL Investments Limited 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 SIL Investments i.e., SIL Investments and KIOCL go up and down completely randomly.

Pair Corralation between SIL Investments and KIOCL

Assuming the 90 days trading horizon SIL Investments Limited is expected to generate 1.22 times more return on investment than KIOCL. However, SIL Investments is 1.22 times more volatile than KIOCL Limited. It trades about 0.06 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.03 per unit of risk. If you would invest  58,620  in SIL Investments Limited on September 30, 2024 and sell it today you would earn a total of  6,730  from holding SIL Investments Limited or generate 11.48% return on investment over 90 days.

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

SIL Investments Limited  vs.  KIOCL Limited

SIL Investments

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIL Investments Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward indicators, SIL Investments sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SIL Investments and KIOCL

The main advantage of trading using opposite SIL Investments and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIL Investments 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 SIL Investments Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.