Correlation Between KEI Industries and State Trading

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

Diversification Opportunities for KEI Industries and State Trading

0.7

Correlation Coefficient

KEI Industries  State Trading

Poor diversification

The 3 months correlation between KEI and State is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KEI Industries Limited and The State Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Trading 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 State Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Trading has no effect on the direction of KEI Industries i.e., KEI Industries and State Trading go up and down completely randomly.

Pair Corralation between KEI Industries and State Trading

Assuming the 90 days trading horizon KEI Industries Limited is expected to generate 0.64 times more return on investment than State Trading. However, KEI Industries Limited is 1.57 times less risky than State Trading. It trades about 0.07 of its potential returns per unit of risk. The State Trading is currently generating about -0.09 per unit of risk. If you would invest  434,025  in KEI Industries Limited on October 4, 2024 and sell it today you would earn a total of  9,640  from holding KEI Industries Limited or generate 2.22% 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.  The State Trading

KEI Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEI Industries Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, KEI Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

State Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The State Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, State Trading is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with KEI Industries and State Trading

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

The idea behind KEI Industries Limited and The State Trading 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.