Correlation Between Kilitch Drugs and Generic Engineering

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

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

Diversification Opportunities for Kilitch Drugs and Generic Engineering

0.55

Correlation Coefficient

Kilitch Drugs  Generic Engineering

Very weak diversification

The 3 months correlation between Kilitch and Generic is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kilitch Drugs Limited and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering and Kilitch Drugs 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 Kilitch Drugs Limited are associated (or correlated) with Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Kilitch Drugs i.e., Kilitch Drugs and Generic Engineering go up and down completely randomly.

Pair Corralation between Kilitch Drugs and Generic Engineering

Assuming the 90 days trading horizon Kilitch Drugs is expected to generate 7.2 times less return on investment than Generic Engineering. But when comparing it to its historical volatility, Kilitch Drugs Limited is 1.96 times less risky than Generic Engineering. It trades about 0.12 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest  3,718  in Generic Engineering Construction on September 19, 2024 and sell it today you would earn a total of  1,177  from holding Generic Engineering Construction or generate 31.66% return on investment over 90 days.

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

Kilitch Drugs Limited  vs.  Generic Engineering Constructi

Kilitch Drugs Limited

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Generic Engineering

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Generic Engineering may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kilitch Drugs and Generic Engineering

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

The idea behind Kilitch Drugs Limited and Generic Engineering Construction 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.