Correlation Between Indian Railway and Kalyani Investment

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

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

Diversification Opportunities for Indian Railway and Kalyani Investment

-0.49

Correlation Coefficient

Indian Railway  Kalyani Investment

Very good diversification

The 3 months correlation between Indian and Kalyani is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Indian Railway Finance and Kalyani Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Investment and Indian Railway 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 Indian Railway Finance are associated (or correlated) with Kalyani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Investment has no effect on the direction of Indian Railway i.e., Indian Railway and Kalyani Investment go up and down completely randomly.

Pair Corralation between Indian Railway and Kalyani Investment

Assuming the 90 days trading horizon Indian Railway Finance is expected to under-perform the Kalyani Investment. But the stock apears to be less risky and, when comparing its historical volatility, Indian Railway Finance is 1.17 times less risky than Kalyani Investment. The stock trades about -0.01 of its potential returns per unit of risk. The Kalyani Investment is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  597,035  in Kalyani Investment on October 8, 2024 and sell it today you would lose (4,320) from holding Kalyani Investment or give up 0.72% of portfolio value over 90 days.

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

Indian Railway Finance  vs.  Kalyani Investment

Indian Railway Finance

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Indian Railway Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indian Railway is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Kalyani Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalyani Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kalyani Investment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Indian Railway and Kalyani Investment

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

The idea behind Indian Railway Finance and Kalyani Investment 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 Anywhere module to track or share privately all of your investments from the convenience of any device.