Correlation Between Gujarat Lease and KEI Industries

Can any of the company-specific risk be diversified away by investing in both Gujarat Lease and KEI Industries 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 KEI Industries 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 KEI Industries Limited, you can compare the effects of market volatilities on Gujarat Lease and KEI Industries 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 KEI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Lease and KEI Industries.

Diversification Opportunities for Gujarat Lease and KEI Industries

0.46

Correlation Coefficient

Gujarat Lease  KEI Industries

Very weak diversification

The 3 months correlation between Gujarat and KEI is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Lease Financing and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries 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 KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of Gujarat Lease i.e., Gujarat Lease and KEI Industries go up and down completely randomly.

Pair Corralation between Gujarat Lease and KEI Industries

Assuming the 90 days trading horizon Gujarat Lease is expected to generate 1.53 times less return on investment than KEI Industries. In addition to that, Gujarat Lease is 1.12 times more volatile than KEI Industries Limited. It trades about 0.05 of its total potential returns per unit of risk. KEI Industries Limited is currently generating about 0.09 per unit of volatility. If you would invest  398,760  in KEI Industries Limited on October 9, 2024 and sell it today you would earn a total of  26,655  from holding KEI Industries Limited or generate 6.68% return on investment over 90 days.

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

Gujarat Lease Financing  vs.  KEI Industries Limited

Gujarat Lease Financing

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gujarat Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

KEI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, KEI Industries is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gujarat Lease and KEI Industries

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

The idea behind Gujarat Lease Financing and KEI Industries 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.