Correlation Between Gujarat Lease and KEC International

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

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

Diversification Opportunities for Gujarat Lease and KEC International

0.65

Correlation Coefficient

Gujarat Lease  KEC International

Poor diversification

The 3 months correlation between Gujarat and KEC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and KEC International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEC International and Gujarat Lease 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 Lease Financing 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 Gujarat Lease i.e., Gujarat Lease and KEC International go up and down completely randomly.

Pair Corralation between Gujarat Lease and KEC International

Assuming the 90 days trading horizon Gujarat Lease Financing is expected to under-perform the KEC International. But the stock apears to be less risky and, when comparing its historical volatility, Gujarat Lease Financing is 1.06 times less risky than KEC International. The stock trades about -0.29 of its potential returns per unit of risk. The KEC International Limited is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  122,055  in KEC International Limited on December 23, 2024 and sell it today you would lose (38,150) from holding KEC International Limited or give up 31.26% of portfolio value over 90 days.

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

Gujarat Lease Financing  vs.  KEC International Limited

Gujarat Lease Financing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gujarat Lease Financing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KEC International

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEC International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Gujarat Lease and KEC International

The main advantage of trading using opposite Gujarat Lease and KEC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Lease 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 Gujarat Lease Financing 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.