Correlation Between Engineers India and Kalyani Investment

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

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

Diversification Opportunities for Engineers India and Kalyani Investment

-0.48

Correlation Coefficient

Engineers India  Kalyani Investment

Very good diversification

The 3 months correlation between Engineers and Kalyani is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Engineers India Limited and Kalyani Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Investment and Engineers India 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 Engineers India Limited are associated (or correlated) with Kalyani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Investment has no effect on the direction of Engineers India i.e., Engineers India and Kalyani Investment go up and down completely randomly.

Pair Corralation between Engineers India and Kalyani Investment

Assuming the 90 days trading horizon Engineers India Limited is expected to under-perform the Kalyani Investment. But the stock apears to be less risky and, when comparing its historical volatility, Engineers India Limited is 1.17 times less risky than Kalyani Investment. The stock trades about -0.09 of its potential returns per unit of risk. The Kalyani Investment is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  658,200  in Kalyani Investment on September 23, 2024 and sell it today you would lose (45,210) from holding Kalyani Investment or give up 6.87% of portfolio value over 90 days.

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

Engineers India Limited  vs.  Kalyani Investment

Engineers India

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engineers India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Kalyani Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalyani Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kalyani Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Engineers India and Kalyani Investment

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

The idea behind Engineers India Limited and Kalyani Investment 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.