Correlation Between KNR Constructions and Kaushalya Infrastructure

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

Diversification Opportunities for KNR Constructions and Kaushalya Infrastructure

0.61

Correlation Coefficient

KNR Constructions  Kaushalya Infrastructure

Poor diversification

The 3 months correlation between KNR and Kaushalya is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Kaushalya Infrastructure Devel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaushalya Infrastructure 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 Kaushalya Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaushalya Infrastructure has no effect on the direction of KNR Constructions i.e., KNR Constructions and Kaushalya Infrastructure go up and down completely randomly.

Pair Corralation between KNR Constructions and Kaushalya Infrastructure

Assuming the 90 days trading horizon KNR Constructions is expected to generate 4.5 times less return on investment than Kaushalya Infrastructure. But when comparing it to its historical volatility, KNR Constructions Limited is 2.32 times less risky than Kaushalya Infrastructure. It trades about 0.09 of its potential returns per unit of risk. Kaushalya Infrastructure Development is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  100,370  in Kaushalya Infrastructure Development on October 5, 2024 and sell it today you would earn a total of  16,900  from holding Kaushalya Infrastructure Development or generate 16.84% return on investment over 90 days.

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

KNR Constructions Limited  vs.  Kaushalya Infrastructure Devel

KNR Constructions

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, KNR Constructions sustained solid returns over the last few months and may actually be approaching a breakup point.

Kaushalya Infrastructure

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaushalya Infrastructure Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Kaushalya Infrastructure disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KNR Constructions and Kaushalya Infrastructure

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

The idea behind KNR Constructions Limited and Kaushalya Infrastructure Development 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.