Correlation Between Gujarat Fluorochemicals and KNR Constructions

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

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

Diversification Opportunities for Gujarat Fluorochemicals and KNR Constructions

0.41

Correlation Coefficient

Gujarat Fluorochemicals  KNR Constructions

Very weak diversification

The 3 months correlation between Gujarat and KNR is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Fluorochemicals Limite and KNR Constructions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNR Constructions and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited 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 Gujarat Fluorochemicals i.e., Gujarat Fluorochemicals and KNR Constructions go up and down completely randomly.

Pair Corralation between Gujarat Fluorochemicals and KNR Constructions

Assuming the 90 days trading horizon Gujarat Fluorochemicals Limited is expected to generate 0.71 times more return on investment than KNR Constructions. However, Gujarat Fluorochemicals Limited is 1.41 times less risky than KNR Constructions. It trades about -0.06 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about -0.14 per unit of risk. If you would invest  439,910  in Gujarat Fluorochemicals Limited on December 27, 2024 and sell it today you would lose (42,240) from holding Gujarat Fluorochemicals Limited or give up 9.6% of portfolio value over 90 days.

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

Gujarat Fluorochemicals Limite  vs.  KNR Constructions Limited

Gujarat Fluorochemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Fluorochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gujarat Fluorochemicals and KNR Constructions

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