Correlation Between KNR Constructions and SBI Life

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

Diversification Opportunities for KNR Constructions and SBI Life

-0.05

Correlation Coefficient

KNR Constructions  SBI Life

Good diversification

The 3 months correlation between KNR and SBI is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and SBI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBI Life Insurance 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 SBI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBI Life Insurance has no effect on the direction of KNR Constructions i.e., KNR Constructions and SBI Life go up and down completely randomly.

Pair Corralation between KNR Constructions and SBI Life

Assuming the 90 days trading horizon KNR Constructions Limited is expected to generate 1.48 times more return on investment than SBI Life. However, KNR Constructions is 1.48 times more volatile than SBI Life Insurance. It trades about 0.1 of its potential returns per unit of risk. SBI Life Insurance is currently generating about -0.3 per unit of risk. If you would invest  29,685  in KNR Constructions Limited on September 23, 2024 and sell it today you would earn a total of  2,835  from holding KNR Constructions Limited or generate 9.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.67%
Values	Daily Returns

KNR Constructions Limited  vs.  SBI Life Insurance

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.

SBI Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBI Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with KNR Constructions and SBI Life

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

The idea behind KNR Constructions Limited and SBI Life Insurance 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.