Correlation Between KEC International and Axita Cotton
Can any of the company-specific risk be diversified away by investing in both KEC International and Axita Cotton 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 KEC International and Axita Cotton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KEC International Limited and Axita Cotton Limited, you can compare the effects of market volatilities on KEC International and Axita Cotton 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 KEC International with a short position of Axita Cotton. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEC International and Axita Cotton.
Diversification Opportunities for KEC International and Axita Cotton
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KEC and Axita is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding KEC International Limited and Axita Cotton Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axita Cotton Limited and KEC International 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 KEC International Limited are associated (or correlated) with Axita Cotton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axita Cotton Limited has no effect on the direction of KEC International i.e., KEC International and Axita Cotton go up and down completely randomly.
Pair Corralation between KEC International and Axita Cotton
Assuming the 90 days trading horizon KEC International Limited is expected to generate 2.43 times more return on investment than Axita Cotton. However, KEC International is 2.43 times more volatile than Axita Cotton Limited. It trades about 0.18 of its potential returns per unit of risk. Axita Cotton Limited is currently generating about -0.22 per unit of risk. If you would invest 103,980 in KEC International Limited on September 26, 2024 and sell it today you would earn a total of 14,155 from holding KEC International Limited or generate 13.61% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
KEC International Limited vs. Axita Cotton Limited
Performance |
Timeline |
KEC International |
Axita Cotton Limited |
KEC International and Axita Cotton Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KEC International and Axita Cotton
The main advantage of trading using opposite KEC International and Axita Cotton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEC International position performs unexpectedly, Axita Cotton 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 Axita Cotton will offset losses from the drop in Axita Cotton's long position.KEC International vs. MRF Limited | KEC International vs. JSW Holdings Limited | KEC International vs. Maharashtra Scooters Limited | KEC International vs. Nalwa Sons Investments |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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