Correlation Between Cholamandalam Investment and KNR Constructions

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

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

Diversification Opportunities for Cholamandalam Investment and KNR Constructions

-0.6

Correlation Coefficient

Cholamandalam Investment  KNR Constructions

Excellent diversification

The 3 months correlation between Cholamandalam and KNR is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Investment and and KNR Constructions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNR Constructions and Cholamandalam Investment 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 Cholamandalam Investment and are associated (or correlated) with KNR Constructions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNR Constructions has no effect on the direction of Cholamandalam Investment i.e., Cholamandalam Investment and KNR Constructions go up and down completely randomly.

Pair Corralation between Cholamandalam Investment and KNR Constructions

Assuming the 90 days trading horizon Cholamandalam Investment and is expected to generate 1.02 times more return on investment than KNR Constructions. However, Cholamandalam Investment is 1.02 times more volatile than KNR Constructions Limited. It trades about 0.08 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about -0.24 per unit of risk. If you would invest  123,384  in Cholamandalam Investment and on November 29, 2024 and sell it today you would earn a total of  13,396  from holding Cholamandalam Investment and or generate 10.86% return on investment over 90 days.

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

Cholamandalam Investment and  vs.  KNR Constructions Limited

Cholamandalam Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cholamandalam Investment and are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, Cholamandalam Investment may actually be approaching a critical reversion point that can send shares even higher in March 2025.

KNR Constructions

Risk-Adjusted Performance

Very Weak

Over the last 90 days KNR Constructions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cholamandalam Investment and KNR Constructions

The main advantage of trading using opposite Cholamandalam Investment and KNR Constructions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cholamandalam Investment position performs unexpectedly, KNR Constructions 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 KNR Constructions will offset losses from the drop in KNR Constructions' long position.

The idea behind Cholamandalam Investment and and KNR Constructions 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.