Correlation Between Kalyani Investment and KNR Constructions

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

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

Diversification Opportunities for Kalyani Investment and KNR Constructions

0.75

Correlation Coefficient

Kalyani Investment  KNR Constructions

Poor diversification

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

Pair Corralation between Kalyani Investment and KNR Constructions

Assuming the 90 days trading horizon Kalyani Investment is expected to under-perform the KNR Constructions. But the stock apears to be less risky and, when comparing its historical volatility, Kalyani Investment is 1.11 times less risky than KNR Constructions. The stock trades about -0.44 of its potential returns per unit of risk. The KNR Constructions Limited is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  31,185  in KNR Constructions Limited on November 20, 2024 and sell it today you would lose (6,975) from holding KNR Constructions Limited or give up 22.37% of portfolio value over 90 days.

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

Kalyani Investment  vs.  KNR Constructions Limited

Kalyani Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kalyani Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

KNR Constructions

Risk-Adjusted Performance

Very Weak

Over the last 90 days KNR Constructions Limited 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 fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kalyani Investment and KNR Constructions

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

The idea behind Kalyani Investment and KNR Constructions 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.