Correlation Between KNR Constructions and Melstar Information

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

Diversification Opportunities for KNR Constructions and Melstar Information

0.14

Correlation Coefficient

KNR Constructions  Melstar Information

Average diversification

The 3 months correlation between KNR and Melstar is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Melstar Information Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melstar Information 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 Melstar Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melstar Information has no effect on the direction of KNR Constructions i.e., KNR Constructions and Melstar Information go up and down completely randomly.

Pair Corralation between KNR Constructions and Melstar Information

Assuming the 90 days trading horizon KNR Constructions is expected to generate 59.98 times less return on investment than Melstar Information. But when comparing it to its historical volatility, KNR Constructions Limited is 33.66 times less risky than Melstar Information. It trades about 0.05 of its potential returns per unit of risk. Melstar Information Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  430.00  in Melstar Information Technologies on September 4, 2024 and sell it today you would lose (5.00) from holding Melstar Information Technologies or give up 1.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

KNR Constructions Limited  vs.  Melstar Information Technologi

KNR Constructions

Risk-Adjusted Performance

0 of 100

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 somewhat strong fundamental indicators, KNR Constructions is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Melstar Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melstar Information Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Melstar Information is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KNR Constructions and Melstar Information

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

The idea behind KNR Constructions Limited and Melstar Information Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.