Correlation Between Gokul Refoils and Kalyani Steels

Can any of the company-specific risk be diversified away by investing in both Gokul Refoils 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 Gokul Refoils and Kalyani Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Gokul Refoils and Kalyani Steels

0.65

Correlation Coefficient

Gokul Refoils  Kalyani Steels

Poor diversification

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

Pair Corralation between Gokul Refoils and Kalyani Steels

Assuming the 90 days trading horizon Gokul Refoils is expected to generate 10.92 times less return on investment than Kalyani Steels. But when comparing it to its historical volatility, Gokul Refoils and is 2.68 times less risky than Kalyani Steels. It trades about 0.06 of its potential returns per unit of risk. Kalyani Steels Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  97,420  in Kalyani Steels Limited on October 8, 2024 and sell it today you would earn a total of  18,665  from holding Kalyani Steels Limited or generate 19.16% return on investment over 90 days.

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

Gokul Refoils and  vs.  Kalyani Steels Limited

Gokul Refoils

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gokul Refoils and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, Gokul Refoils displayed solid returns over the last few months and may actually be approaching a breakup point.

Kalyani Steels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gokul Refoils and Kalyani Steels

The main advantage of trading using opposite Gokul Refoils and Kalyani Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gokul Refoils 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 Gokul Refoils and 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.