Correlation Between Karur Vysya and Banco Products

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

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

Diversification Opportunities for Karur Vysya and Banco Products

-0.04

Correlation Coefficient

Karur Vysya  Banco Products

Good diversification

The 3 months correlation between Karur and Banco is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Karur Vysya Bank and Banco Products Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Products and Karur Vysya 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 Karur Vysya Bank are associated (or correlated) with Banco Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Products has no effect on the direction of Karur Vysya i.e., Karur Vysya and Banco Products go up and down completely randomly.

Pair Corralation between Karur Vysya and Banco Products

Assuming the 90 days trading horizon Karur Vysya Bank is expected to generate 0.48 times more return on investment than Banco Products. However, Karur Vysya Bank is 2.08 times less risky than Banco Products. It trades about -0.21 of its potential returns per unit of risk. Banco Products Limited is currently generating about -0.12 per unit of risk. If you would invest  24,200  in Karur Vysya Bank on October 8, 2024 and sell it today you would lose (1,939) from holding Karur Vysya Bank or give up 8.01% of portfolio value over 90 days.

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

Karur Vysya Bank  vs.  Banco Products Limited

Karur Vysya Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Karur Vysya Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Karur Vysya may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Banco Products

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Products Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Banco Products displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Karur Vysya and Banco Products

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

The idea behind Karur Vysya Bank and Banco Products 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.