Correlation Between Modi Rubber and KIOCL

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

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

Diversification Opportunities for Modi Rubber and KIOCL

0.37

Correlation Coefficient

Modi Rubber  KIOCL

Weak diversification

The 3 months correlation between Modi and KIOCL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Modi Rubber Limited and KIOCL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIOCL Limited and Modi Rubber 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 Modi Rubber 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 Modi Rubber i.e., Modi Rubber and KIOCL go up and down completely randomly.

Pair Corralation between Modi Rubber and KIOCL

Assuming the 90 days trading horizon Modi Rubber Limited is expected to generate 1.8 times more return on investment than KIOCL. However, Modi Rubber is 1.8 times more volatile than KIOCL Limited. It trades about 0.1 of its potential returns per unit of risk. KIOCL Limited is currently generating about 0.13 per unit of risk. If you would invest  10,300  in Modi Rubber Limited on April 13, 2025 and sell it today you would earn a total of  2,493  from holding Modi Rubber Limited or generate 24.2% return on investment over 90 days.

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

Modi Rubber Limited  vs.  KIOCL Limited

Modi Rubber Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Modi Rubber Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, Modi Rubber sustained solid returns over the last few months and may actually be approaching a breakup point.

KIOCL Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KIOCL Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, KIOCL displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Modi Rubber and KIOCL

The main advantage of trading using opposite Modi Rubber and KIOCL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Modi Rubber 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 Modi Rubber 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.