Correlation Between S P and KIOCL

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

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

Diversification Opportunities for S P and KIOCL

0.82

Correlation Coefficient

S P  KIOCL

Very poor diversification

The 3 months correlation between SPAL and KIOCL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding S P Apparels and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and S P 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 S P Apparels 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 S P i.e., S P and KIOCL go up and down completely randomly.

Pair Corralation between S P and KIOCL

Assuming the 90 days trading horizon S P Apparels is expected to generate 1.02 times more return on investment than KIOCL. However, S P is 1.02 times more volatile than KIOCL Limited. It trades about -0.13 of its potential returns per unit of risk. KIOCL Limited is currently generating about -0.2 per unit of risk. If you would invest  94,690  in S P Apparels on December 2, 2024 and sell it today you would lose (26,800) from holding S P Apparels or give up 28.3% of portfolio value over 90 days.

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

S P Apparels  vs.  KIOCL Limited

S P Apparels

Risk-Adjusted Performance

Very Weak

Over the last 90 days S P Apparels 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KIOCL Limited

Risk-Adjusted Performance

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with S P and KIOCL

The main advantage of trading using opposite S P and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S P 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 S P Apparels 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.