Correlation Between KNR Constructions and Texmaco Rail

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

Diversification Opportunities for KNR Constructions and Texmaco Rail

0.94

Correlation Coefficient

KNR Constructions  Texmaco Rail

Almost no diversification

The 3 months correlation between KNR and Texmaco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Texmaco Rail Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texmaco Rail Engineering 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 Texmaco Rail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texmaco Rail Engineering has no effect on the direction of KNR Constructions i.e., KNR Constructions and Texmaco Rail go up and down completely randomly.

Pair Corralation between KNR Constructions and Texmaco Rail

Assuming the 90 days trading horizon KNR Constructions Limited is expected to generate 0.77 times more return on investment than Texmaco Rail. However, KNR Constructions Limited is 1.3 times less risky than Texmaco Rail. It trades about -0.12 of its potential returns per unit of risk. Texmaco Rail Engineering is currently generating about -0.12 per unit of risk. If you would invest  31,565  in KNR Constructions Limited on December 26, 2024 and sell it today you would lose (7,696) from holding KNR Constructions Limited or give up 24.38% of portfolio value over 90 days.

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

KNR Constructions Limited  vs.  Texmaco Rail Engineering

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Texmaco Rail Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texmaco Rail Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with KNR Constructions and Texmaco Rail

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

The idea behind KNR Constructions Limited and Texmaco Rail Engineering 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.