Correlation Between Tata Consultancy and Kilitch Drugs

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

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

Diversification Opportunities for Tata Consultancy and Kilitch Drugs

0.16

Correlation Coefficient

Tata Consultancy  Kilitch Drugs

Average diversification

The 3 months correlation between Tata and Kilitch is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tata Consultancy Services 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 Tata Consultancy 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 Tata Consultancy Services 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 Tata Consultancy i.e., Tata Consultancy and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Tata Consultancy and Kilitch Drugs

Assuming the 90 days trading horizon Tata Consultancy Services is expected to under-perform the Kilitch Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Tata Consultancy Services is 1.5 times less risky than Kilitch Drugs. The stock trades about -0.2 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tata Consultancy Services  vs.  Kilitch Drugs Limited

Tata Consultancy Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tata Consultancy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing 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 Tata Consultancy and Kilitch Drugs

The main advantage of trading using opposite Tata Consultancy and Kilitch Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Consultancy 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 Tata Consultancy Services 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.