Correlation Between KEC International and Kalpataru Projects

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

Diversification Opportunities for KEC International and Kalpataru Projects

0.5

Correlation Coefficient

KEC International  Kalpataru Projects

Very weak diversification

The 3 months correlation between KEC and Kalpataru is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding KEC International Limited and Kalpataru Projects Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalpataru Projects 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 Kalpataru Projects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalpataru Projects has no effect on the direction of KEC International i.e., KEC International and Kalpataru Projects go up and down completely randomly.

Pair Corralation between KEC International and Kalpataru Projects

Assuming the 90 days trading horizon KEC International Limited is expected to generate 1.55 times more return on investment than Kalpataru Projects. However, KEC International is 1.55 times more volatile than Kalpataru Projects International. It trades about 0.01 of its potential returns per unit of risk. Kalpataru Projects International is currently generating about -0.05 per unit of risk. If you would invest  98,130  in KEC International Limited on October 20, 2024 and sell it today you would lose (1,360) from holding KEC International Limited or give up 1.39% of portfolio value over 90 days.

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

KEC International Limited  vs.  Kalpataru Projects Internation

KEC International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEC International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, KEC International is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Kalpataru Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalpataru Projects International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with KEC International and Kalpataru Projects

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

The idea behind KEC International Limited and Kalpataru Projects International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.