Correlation Between Electrosteel Castings and KEC International

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

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

Diversification Opportunities for Electrosteel Castings and KEC International

-0.08

Correlation Coefficient

Electrosteel Castings  KEC International

Good diversification

The 3 months correlation between Electrosteel and KEC is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Electrosteel Castings Limited and KEC International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEC International and Electrosteel Castings 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 Electrosteel Castings Limited are associated (or correlated) with KEC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEC International has no effect on the direction of Electrosteel Castings i.e., Electrosteel Castings and KEC International go up and down completely randomly.

Pair Corralation between Electrosteel Castings and KEC International

Assuming the 90 days trading horizon Electrosteel Castings Limited is expected to generate 1.28 times more return on investment than KEC International. However, Electrosteel Castings is 1.28 times more volatile than KEC International Limited. It trades about 0.1 of its potential returns per unit of risk. KEC International Limited is currently generating about 0.07 per unit of risk. If you would invest  3,493  in Electrosteel Castings Limited on October 24, 2024 and sell it today you would earn a total of  9,068  from holding Electrosteel Castings Limited or generate 259.6% return on investment over 90 days.

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

Electrosteel Castings Limited  vs.  KEC International Limited

Electrosteel Castings

Risk-Adjusted Performance

0 of 100

Very Weak

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

KEC International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEC International Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, KEC International is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Electrosteel Castings and KEC International

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

The idea behind Electrosteel Castings Limited and KEC International 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.