Correlation Between LT Foods and Kilitch Drugs

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

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

Diversification Opportunities for LT Foods and Kilitch Drugs

0.58

Correlation Coefficient

LT Foods  Kilitch Drugs

Very weak diversification

The 3 months correlation between LTFOODS and Kilitch is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding LT Foods Limited 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 LT Foods 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 LT Foods Limited 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 LT Foods i.e., LT Foods and Kilitch Drugs go up and down completely randomly.

Pair Corralation between LT Foods and Kilitch Drugs

Assuming the 90 days trading horizon LT Foods Limited is expected to generate 1.4 times more return on investment than Kilitch Drugs. However, LT Foods is 1.4 times more volatile than Kilitch Drugs Limited. It trades about 0.51 of its potential returns per unit of risk. Kilitch Drugs Limited is currently generating about 0.12 per unit of risk. If you would invest  34,335  in LT Foods Limited on September 19, 2024 and sell it today you would earn a total of  8,685  from holding LT Foods Limited or generate 25.29% return on investment over 90 days.

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

LT Foods Limited  vs.  Kilitch Drugs Limited

LT Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LT Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LT Foods is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with LT Foods and Kilitch Drugs

The main advantage of trading using opposite LT Foods and Kilitch Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LT Foods 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 LT Foods Limited 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.