Correlation Between KNR Constructions and Radiant Cash

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

Diversification Opportunities for KNR Constructions and Radiant Cash

0.3

Correlation Coefficient

KNR Constructions  Radiant Cash

Weak diversification

The 3 months correlation between KNR and Radiant is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Radiant Cash Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radiant Cash Management 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 Radiant Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radiant Cash Management has no effect on the direction of KNR Constructions i.e., KNR Constructions and Radiant Cash go up and down completely randomly.

Pair Corralation between KNR Constructions and Radiant Cash

Assuming the 90 days trading horizon KNR Constructions Limited is expected to generate 1.6 times more return on investment than Radiant Cash. However, KNR Constructions is 1.6 times more volatile than Radiant Cash Management. It trades about 0.09 of its potential returns per unit of risk. Radiant Cash Management is currently generating about -0.04 per unit of risk. If you would invest  31,015  in KNR Constructions Limited on October 5, 2024 and sell it today you would earn a total of  3,565  from holding KNR Constructions Limited or generate 11.49% return on investment over 90 days.

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

KNR Constructions Limited  vs.  Radiant Cash Management

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.

Radiant Cash Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radiant Cash Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Radiant Cash is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KNR Constructions and Radiant Cash

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

The idea behind KNR Constructions Limited and Radiant Cash Management 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.