Correlation Between Kingfa Science and Radico Khaitan

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

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

Diversification Opportunities for Kingfa Science and Radico Khaitan

-0.68

Correlation Coefficient

Kingfa Science  Radico Khaitan

Excellent diversification

The 3 months correlation between Kingfa and Radico is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Radico Khaitan Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radico Khaitan and Kingfa Science 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 Kingfa Science Technology are associated (or correlated) with Radico Khaitan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radico Khaitan has no effect on the direction of Kingfa Science i.e., Kingfa Science and Radico Khaitan go up and down completely randomly.

Pair Corralation between Kingfa Science and Radico Khaitan

Assuming the 90 days trading horizon Kingfa Science is expected to generate 15.5 times less return on investment than Radico Khaitan. In addition to that, Kingfa Science is 1.02 times more volatile than Radico Khaitan Limited. It trades about 0.01 of its total potential returns per unit of risk. Radico Khaitan Limited is currently generating about 0.14 per unit of volatility. If you would invest  200,000  in Radico Khaitan Limited on September 5, 2024 and sell it today you would earn a total of  38,455  from holding Radico Khaitan Limited or generate 19.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Kingfa Science Technology  vs.  Radico Khaitan Limited

Kingfa Science Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingfa Science Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Kingfa Science is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Radico Khaitan

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Radico Khaitan Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Radico Khaitan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingfa Science and Radico Khaitan

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

The idea behind Kingfa Science Technology and Radico Khaitan 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.