Correlation Between Gujarat Narmada and Karur Vysya

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

By analyzing existing cross correlation between Gujarat Narmada Valley and Karur Vysya Bank, you can compare the effects of market volatilities on Gujarat Narmada and Karur Vysya 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 Narmada with a short position of Karur Vysya. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gujarat Narmada and Karur Vysya.

Diversification Opportunities for Gujarat Narmada and Karur Vysya

0.01

Correlation Coefficient

Gujarat Narmada  Karur Vysya

Significant diversification

The 3 months correlation between Gujarat and Karur is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Karur Vysya Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karur Vysya Bank and Gujarat Narmada 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 Narmada Valley are associated (or correlated) with Karur Vysya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karur Vysya Bank has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Karur Vysya go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Karur Vysya

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to under-perform the Karur Vysya. In addition to that, Gujarat Narmada is 1.03 times more volatile than Karur Vysya Bank. It trades about -0.04 of its total potential returns per unit of risk. Karur Vysya Bank is currently generating about 0.05 per unit of volatility. If you would invest  19,010  in Karur Vysya Bank on October 9, 2024 and sell it today you would earn a total of  2,784  from holding Karur Vysya Bank or generate 14.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.46%
Values	Daily Returns

Gujarat Narmada Valley  vs.  Karur Vysya Bank

Gujarat Narmada Valley

Risk-Adjusted Performance

0 of 100

Very Weak

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

Karur Vysya Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karur Vysya Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Karur Vysya may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gujarat Narmada and Karur Vysya

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

The idea behind Gujarat Narmada Valley and Karur Vysya Bank 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.