Correlation Between KIOCL and VA Tech

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

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

Diversification Opportunities for KIOCL and VA Tech

-0.43

Correlation Coefficient

KIOCL  VA Tech

Very good diversification

The 3 months correlation between KIOCL and WABAG is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and VA Tech Wabag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VA Tech Wabag and KIOCL 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 KIOCL Limited are associated (or correlated) with VA Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VA Tech Wabag has no effect on the direction of KIOCL i.e., KIOCL and VA Tech go up and down completely randomly.

Pair Corralation between KIOCL and VA Tech

Assuming the 90 days trading horizon KIOCL Limited is expected to under-perform the VA Tech. In addition to that, KIOCL is 1.15 times more volatile than VA Tech Wabag. It trades about 0.0 of its total potential returns per unit of risk. VA Tech Wabag is currently generating about 0.17 per unit of volatility. If you would invest  137,265  in VA Tech Wabag on September 12, 2024 and sell it today you would earn a total of  46,595  from holding VA Tech Wabag or generate 33.95% return on investment over 90 days.

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

KIOCL Limited  vs.  VA Tech Wabag

KIOCL Limited

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, KIOCL is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

VA Tech Wabag

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VA Tech Wabag are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, VA Tech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KIOCL and VA Tech

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

The idea behind KIOCL Limited and VA Tech Wabag 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.