Correlation Between KEI Industries and MRF

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

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

Diversification Opportunities for KEI Industries and MRF

0.75

Correlation Coefficient

KEI Industries  MRF

Poor diversification

The 3 months correlation between KEI and MRF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KEI Industries Limited and MRF Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MRF Limited and KEI Industries 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 KEI Industries Limited are associated (or correlated) with MRF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MRF Limited has no effect on the direction of KEI Industries i.e., KEI Industries and MRF go up and down completely randomly.

Pair Corralation between KEI Industries and MRF

Assuming the 90 days trading horizon KEI Industries Limited is expected to generate 2.23 times more return on investment than MRF. However, KEI Industries is 2.23 times more volatile than MRF Limited. It trades about 0.05 of its potential returns per unit of risk. MRF Limited is currently generating about -0.05 per unit of risk. If you would invest  410,790  in KEI Industries Limited on October 6, 2024 and sell it today you would earn a total of  25,595  from holding KEI Industries Limited or generate 6.23% return on investment over 90 days.

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

KEI Industries Limited  vs.  MRF Limited

KEI Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KEI Industries Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, KEI Industries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KEI Industries and MRF

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

The idea behind KEI Industries Limited and MRF 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.