Correlation Between Spencers Retail and Kilitch Drugs

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

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

Diversification Opportunities for Spencers Retail and Kilitch Drugs

0.72

Correlation Coefficient

Spencers Retail  Kilitch Drugs

Poor diversification

The 3 months correlation between Spencers and Kilitch is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail 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 Spencers Retail 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 Spencers Retail 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 Spencers Retail i.e., Spencers Retail and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Spencers Retail and Kilitch Drugs

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Kilitch Drugs. In addition to that, Spencers Retail is 1.05 times more volatile than Kilitch Drugs Limited. It trades about -0.06 of its total potential returns per unit of risk. Kilitch Drugs Limited is currently generating about -0.01 per unit of volatility. If you would invest  33,010  in Kilitch Drugs Limited on September 3, 2024 and sell it today you would lose (1,450) from holding Kilitch Drugs Limited or give up 4.39% of portfolio value over 90 days.

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

Spencers Retail Limited  vs.  Kilitch Drugs Limited

Spencers Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail 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 fairly strong basic indicators, Kilitch Drugs is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Spencers Retail and Kilitch Drugs

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

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