Correlation Between Rainbow Childrens and KIOCL

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Can any of the company-specific risk be diversified away by investing in both Rainbow Childrens and KIOCL 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 Rainbow Childrens and KIOCL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rainbow Childrens Medicare and KIOCL Limited, you can compare the effects of market volatilities on Rainbow Childrens and KIOCL 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 Rainbow Childrens with a short position of KIOCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rainbow Childrens and KIOCL.

Diversification Opportunities for Rainbow Childrens and KIOCL

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Rainbow and KIOCL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Rainbow Childrens Medicare and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Rainbow Childrens 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 Rainbow Childrens Medicare are associated (or correlated) with KIOCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIOCL Limited has no effect on the direction of Rainbow Childrens i.e., Rainbow Childrens and KIOCL go up and down completely randomly.

Pair Corralation between Rainbow Childrens and KIOCL

Assuming the 90 days trading horizon Rainbow Childrens Medicare is expected to generate 0.72 times more return on investment than KIOCL. However, Rainbow Childrens Medicare is 1.39 times less risky than KIOCL. It trades about 0.14 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.03 per unit of risk. If you would invest  129,210  in Rainbow Childrens Medicare on September 18, 2024 and sell it today you would earn a total of  29,495  from holding Rainbow Childrens Medicare or generate 22.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Rainbow Childrens Medicare  vs.  KIOCL Limited

 Performance 
       Timeline  
Rainbow Childrens 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Childrens Medicare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental drivers, Rainbow Childrens showed solid returns over the last few months and may actually be approaching a breakup point.
KIOCL Limited 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, KIOCL is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Rainbow Childrens and KIOCL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rainbow Childrens and KIOCL

The main advantage of trading using opposite Rainbow Childrens and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rainbow Childrens position performs unexpectedly, KIOCL 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 KIOCL will offset losses from the drop in KIOCL's long position.
The idea behind Rainbow Childrens Medicare and KIOCL 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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