Correlation Between KNR Constructions and Aban Offshore

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

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

Diversification Opportunities for KNR Constructions and Aban Offshore

0.1

Correlation Coefficient

KNR Constructions  Aban Offshore

Average diversification

The 3 months correlation between KNR and Aban is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Aban Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aban Offshore Limited and KNR Constructions 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 KNR Constructions Limited are associated (or correlated) with Aban Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aban Offshore Limited has no effect on the direction of KNR Constructions i.e., KNR Constructions and Aban Offshore go up and down completely randomly.

Pair Corralation between KNR Constructions and Aban Offshore

Assuming the 90 days trading horizon KNR Constructions Limited is expected to generate 0.97 times more return on investment than Aban Offshore. However, KNR Constructions Limited is 1.03 times less risky than Aban Offshore. It trades about 0.07 of its potential returns per unit of risk. Aban Offshore Limited is currently generating about -0.06 per unit of risk. If you would invest  29,350  in KNR Constructions Limited on October 22, 2024 and sell it today you would earn a total of  2,645  from holding KNR Constructions Limited or generate 9.01% return on investment over 90 days.

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

KNR Constructions Limited  vs.  Aban Offshore Limited

KNR Constructions

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, KNR Constructions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Aban Offshore Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aban Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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 KNR Constructions and Aban Offshore

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

The idea behind KNR Constructions Limited and Aban Offshore 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.