Correlation Between KNR Constructions and SIL Investments

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

Diversification Opportunities for KNR Constructions and SIL Investments

0.92

Correlation Coefficient

KNR Constructions  SIL Investments

Almost no diversification

The 3 months correlation between KNR and SIL is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and SIL Investments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIL Investments 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 SIL Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIL Investments has no effect on the direction of KNR Constructions i.e., KNR Constructions and SIL Investments go up and down completely randomly.

Pair Corralation between KNR Constructions and SIL Investments

Assuming the 90 days trading horizon KNR Constructions Limited is expected to under-perform the SIL Investments. But the stock apears to be less risky and, when comparing its historical volatility, KNR Constructions Limited is 1.05 times less risky than SIL Investments. The stock trades about -0.24 of its potential returns per unit of risk. The SIL Investments Limited is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  68,465  in SIL Investments Limited on November 29, 2024 and sell it today you would lose (20,245) from holding SIL Investments Limited or give up 29.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

KNR Constructions Limited  vs.  SIL Investments Limited

KNR Constructions

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

SIL Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIL Investments Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with KNR Constructions and SIL Investments

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

The idea behind KNR Constructions Limited and SIL Investments 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.