Correlation Between KNR Constructions and HCL Technologies

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

Diversification Opportunities for KNR Constructions and HCL Technologies

0.68

Correlation Coefficient

KNR Constructions  HCL Technologies

Poor diversification

The 3 months correlation between KNR and HCL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and HCL Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCL Technologies 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 HCL Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCL Technologies has no effect on the direction of KNR Constructions i.e., KNR Constructions and HCL Technologies go up and down completely randomly.

Pair Corralation between KNR Constructions and HCL Technologies

Assuming the 90 days trading horizon KNR Constructions is expected to generate 1.81 times less return on investment than HCL Technologies. In addition to that, KNR Constructions is 2.02 times more volatile than HCL Technologies Limited. It trades about 0.03 of its total potential returns per unit of risk. HCL Technologies Limited is currently generating about 0.11 per unit of volatility. If you would invest  179,792  in HCL Technologies Limited on October 9, 2024 and sell it today you would earn a total of  15,513  from holding HCL Technologies Limited or generate 8.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

KNR Constructions Limited  vs.  HCL Technologies Limited

KNR Constructions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, KNR Constructions is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

HCL Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCL Technologies Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, HCL Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KNR Constructions and HCL Technologies

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

The idea behind KNR Constructions Limited and HCL Technologies 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.