Correlation Between Tata Communications and KIOCL

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

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

Diversification Opportunities for Tata Communications and KIOCL

0.58

Correlation Coefficient

Tata Communications  KIOCL

Very weak diversification

The 3 months correlation between Tata and KIOCL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Tata Communications Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Tata Communications 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 Tata Communications Limited 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 Tata Communications i.e., Tata Communications and KIOCL go up and down completely randomly.

Pair Corralation between Tata Communications and KIOCL

Assuming the 90 days trading horizon Tata Communications Limited is expected to under-perform the KIOCL. But the stock apears to be less risky and, when comparing its historical volatility, Tata Communications Limited is 1.94 times less risky than KIOCL. The stock trades about -0.1 of its potential returns per unit of risk. The KIOCL Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  41,130  in KIOCL Limited on August 31, 2024 and sell it today you would lose (4,355) from holding KIOCL Limited or give up 10.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Tata Communications Limited  vs.  KIOCL Limited

Tata Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Communications Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Tata Communications and KIOCL

The main advantage of trading using opposite Tata Communications and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Communications 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 Tata Communications Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.