Correlation Between Repco Home and Kilitch Drugs

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

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

Diversification Opportunities for Repco Home and Kilitch Drugs

0.8

Correlation Coefficient

Repco Home  Kilitch Drugs

Very poor diversification

The 3 months correlation between Repco and Kilitch is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance 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 Repco Home 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 Repco Home Finance 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 Repco Home i.e., Repco Home and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Repco Home and Kilitch Drugs

Assuming the 90 days trading horizon Repco Home Finance is expected to under-perform the Kilitch Drugs. But the stock apears to be less risky and, when comparing its historical volatility, Repco Home Finance is 1.22 times less risky than Kilitch Drugs. The stock trades about -0.15 of its potential returns per unit of risk. The Kilitch Drugs Limited is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  36,930  in Kilitch Drugs Limited on September 19, 2024 and sell it today you would lose (4,475) from holding Kilitch Drugs Limited or give up 12.12% of portfolio value over 90 days.

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

Repco Home Finance  vs.  Kilitch Drugs Limited

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 Repco Home and Kilitch Drugs

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

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.