Correlation Between Kilitch Drugs and Lakshmi Precision

Can any of the company-specific risk be diversified away by investing in both Kilitch Drugs and Lakshmi Precision 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 Lakshmi Precision 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 Lakshmi Precision Screws, you can compare the effects of market volatilities on Kilitch Drugs and Lakshmi Precision 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 Lakshmi Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kilitch Drugs and Lakshmi Precision.

Diversification Opportunities for Kilitch Drugs and Lakshmi Precision

0.49

Correlation Coefficient

Kilitch Drugs  Lakshmi Precision

Very weak diversification

The 3 months correlation between Kilitch and Lakshmi is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Kilitch Drugs Limited and Lakshmi Precision Screws in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Precision Screws 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 Lakshmi Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Precision Screws has no effect on the direction of Kilitch Drugs i.e., Kilitch Drugs and Lakshmi Precision go up and down completely randomly.

Pair Corralation between Kilitch Drugs and Lakshmi Precision

Assuming the 90 days trading horizon Kilitch Drugs Limited is expected to under-perform the Lakshmi Precision. But the stock apears to be less risky and, when comparing its historical volatility, Kilitch Drugs Limited is 1.12 times less risky than Lakshmi Precision. The stock trades about -0.02 of its potential returns per unit of risk. The Lakshmi Precision Screws is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  512.00  in Lakshmi Precision Screws on September 2, 2024 and sell it today you would earn a total of  22.00  from holding Lakshmi Precision Screws or generate 4.3% 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.  Lakshmi Precision Screws

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 fairly strong basic indicators, Kilitch Drugs is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Lakshmi Precision Screws

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lakshmi Precision Screws are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Lakshmi Precision may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kilitch Drugs and Lakshmi Precision

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

The idea behind Kilitch Drugs Limited and Lakshmi Precision Screws 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.