Correlation Between Visa and Kilitch Drugs

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

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

Diversification Opportunities for Visa and Kilitch Drugs

-0.48

Correlation Coefficient

Visa  Kilitch Drugs

Very good diversification

The 3 months correlation between Visa and Kilitch is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Kilitch Drugs go up and down completely randomly.

Pair Corralation between Visa and Kilitch Drugs

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.47 times more return on investment than Kilitch Drugs. However, Visa Class A is 2.14 times less risky than Kilitch Drugs. It trades about 0.17 of its potential returns per unit of risk. Kilitch Drugs Limited is currently generating about -0.01 per unit of risk. If you would invest  27,801  in Visa Class A on September 3, 2024 and sell it today you would earn a total of  3,864  from holding Visa Class A or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Kilitch Drugs Limited

Visa Class A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

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 Visa and Kilitch Drugs

The main advantage of trading using opposite Visa and Kilitch Drugs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.