Correlation Between KNR Constructions and TECIL Chemicals

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

Diversification Opportunities for KNR Constructions and TECIL Chemicals

-0.1

Correlation Coefficient

KNR Constructions  TECIL Chemicals

Good diversification

The 3 months correlation between KNR and TECIL is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and TECIL Chemicals and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TECIL Chemicals 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 TECIL Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TECIL Chemicals has no effect on the direction of KNR Constructions i.e., KNR Constructions and TECIL Chemicals go up and down completely randomly.

Pair Corralation between KNR Constructions and TECIL Chemicals

Assuming the 90 days trading horizon KNR Constructions Limited is expected to generate 1.01 times more return on investment than TECIL Chemicals. However, KNR Constructions is 1.01 times more volatile than TECIL Chemicals and. It trades about -0.02 of its potential returns per unit of risk. TECIL Chemicals and is currently generating about -0.04 per unit of risk. If you would invest  32,125  in KNR Constructions Limited on September 27, 2024 and sell it today you would lose (300.00) from holding KNR Constructions Limited or give up 0.93% of portfolio value over 90 days.

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

KNR Constructions Limited  vs.  TECIL Chemicals and

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.

TECIL Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TECIL Chemicals and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, TECIL Chemicals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KNR Constructions and TECIL Chemicals

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

The idea behind KNR Constructions Limited and TECIL Chemicals and 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.