Correlation Between Gujarat Narmada and Kalyani Steels

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

Diversification Opportunities for Gujarat Narmada and Kalyani Steels

0.25

Correlation Coefficient

Gujarat Narmada  Kalyani Steels

Modest diversification

The 3 months correlation between Gujarat and Kalyani is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Narmada Valley and Kalyani Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Steels 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 Kalyani Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Steels has no effect on the direction of Gujarat Narmada i.e., Gujarat Narmada and Kalyani Steels go up and down completely randomly.

Pair Corralation between Gujarat Narmada and Kalyani Steels

Assuming the 90 days trading horizon Gujarat Narmada Valley is expected to generate 0.9 times more return on investment than Kalyani Steels. However, Gujarat Narmada Valley is 1.11 times less risky than Kalyani Steels. It trades about -0.28 of its potential returns per unit of risk. Kalyani Steels Limited is currently generating about -0.3 per unit of risk. If you would invest  55,445  in Gujarat Narmada Valley on December 2, 2024 and sell it today you would lose (8,560) from holding Gujarat Narmada Valley or give up 15.44% of portfolio value over 90 days.

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

Gujarat Narmada Valley  vs.  Kalyani Steels Limited

Gujarat Narmada Valley

Risk-Adjusted Performance

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 conflicting 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.

Kalyani Steels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kalyani Steels Limited 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 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 Narmada and Kalyani Steels

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

The idea behind Gujarat Narmada Valley and Kalyani Steels 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.