Correlation Between KEC International and Garuda Construction

Can any of the company-specific risk be diversified away by investing in both KEC International and Garuda Construction 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 Garuda Construction 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 Garuda Construction Engineering, you can compare the effects of market volatilities on KEC International and Garuda Construction 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 Garuda Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEC International and Garuda Construction.

Diversification Opportunities for KEC International and Garuda Construction

0.01

Correlation Coefficient

KEC International  Garuda Construction

Significant diversification

The 3 months correlation between KEC and Garuda is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding KEC International Limited and Garuda Construction Engineerin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garuda Construction 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 Garuda Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garuda Construction has no effect on the direction of KEC International i.e., KEC International and Garuda Construction go up and down completely randomly.

Pair Corralation between KEC International and Garuda Construction

Assuming the 90 days trading horizon KEC International Limited is expected to generate 0.58 times more return on investment than Garuda Construction. However, KEC International Limited is 1.74 times less risky than Garuda Construction. It trades about 0.09 of its potential returns per unit of risk. Garuda Construction Engineering is currently generating about -0.06 per unit of risk. If you would invest  92,810  in KEC International Limited on September 3, 2024 and sell it today you would earn a total of  12,620  from holding KEC International Limited or generate 13.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	53.97%
Values	Daily Returns

KEC International Limited  vs.  Garuda Construction Engineerin

KEC International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KEC International Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, KEC International exhibited solid returns over the last few months and may actually be approaching a breakup point.

Garuda Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garuda Construction Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KEC International and Garuda Construction

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

The idea behind KEC International Limited and Garuda Construction Engineering 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.