Correlation Between KNR Constructions and Wipro

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

Diversification Opportunities for KNR Constructions and Wipro

0.32

Correlation Coefficient

KNR Constructions  Wipro

Weak diversification

The 3 months correlation between KNR and Wipro is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and Wipro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wipro Limited 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 Wipro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wipro Limited has no effect on the direction of KNR Constructions i.e., KNR Constructions and Wipro go up and down completely randomly.

Pair Corralation between KNR Constructions and Wipro

Assuming the 90 days trading horizon KNR Constructions Limited is expected to under-perform the Wipro. In addition to that, KNR Constructions is 1.57 times more volatile than Wipro Limited. It trades about -0.19 of its total potential returns per unit of risk. Wipro Limited is currently generating about -0.09 per unit of volatility. If you would invest  29,808  in Wipro Limited on December 30, 2024 and sell it today you would lose (3,583) from holding Wipro Limited or give up 12.02% of portfolio value over 90 days.

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

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

Wipro Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wipro Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with KNR Constructions and Wipro

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

The idea behind KNR Constructions Limited and Wipro 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.