Correlation Between Gujarat Raffia and Kalyani Steels

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

Diversification Opportunities for Gujarat Raffia and Kalyani Steels

0.94

Correlation Coefficient

Gujarat Raffia  Kalyani Steels

Almost no diversification

The 3 months correlation between Gujarat and Kalyani is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Gujarat Raffia Industries 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 Raffia 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 Raffia Industries 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 Raffia i.e., Gujarat Raffia and Kalyani Steels go up and down completely randomly.

Pair Corralation between Gujarat Raffia and Kalyani Steels

Assuming the 90 days trading horizon Gujarat Raffia Industries is expected to generate 1.06 times more return on investment than Kalyani Steels. However, Gujarat Raffia is 1.06 times more volatile than Kalyani Steels Limited. It trades about 0.34 of its potential returns per unit of risk. Kalyani Steels Limited is currently generating about 0.18 per unit of risk. If you would invest  4,600  in Gujarat Raffia Industries on September 26, 2024 and sell it today you would earn a total of  4,547  from holding Gujarat Raffia Industries or generate 98.85% return on investment over 90 days.

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

Gujarat Raffia Industries  vs.  Kalyani Steels Limited

Gujarat Raffia Industries

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Raffia Industries are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Gujarat Raffia reported 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 uncertain 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 Gujarat Raffia and Kalyani Steels

The main advantage of trading using opposite Gujarat Raffia and Kalyani Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gujarat Raffia 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 Raffia Industries 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.