Correlation Between KNR Constructions and Sarthak Metals

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

Diversification Opportunities for KNR Constructions and Sarthak Metals

-0.17

Correlation Coefficient

KNR Constructions  Sarthak Metals

Good diversification

The 3 months correlation between KNR and Sarthak is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Sarthak Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarthak Metals 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 Sarthak Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarthak Metals has no effect on the direction of KNR Constructions i.e., KNR Constructions and Sarthak Metals go up and down completely randomly.

Pair Corralation between KNR Constructions and Sarthak Metals

Assuming the 90 days trading horizon KNR Constructions is expected to generate 1.79 times less return on investment than Sarthak Metals. But when comparing it to its historical volatility, KNR Constructions Limited is 1.33 times less risky than Sarthak Metals. It trades about 0.12 of its potential returns per unit of risk. Sarthak Metals Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  15,796  in Sarthak Metals Limited on October 4, 2024 and sell it today you would earn a total of  1,607  from holding Sarthak Metals Limited or generate 10.17% return on investment over 90 days.

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

KNR Constructions Limited  vs.  Sarthak Metals Limited

KNR Constructions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, KNR Constructions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sarthak Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sarthak Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarthak Metals 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 Sarthak Metals

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

The idea behind KNR Constructions Limited and Sarthak Metals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.