Correlation Between Kohinoor Foods and Action Construction

Can any of the company-specific risk be diversified away by investing in both Kohinoor Foods and Action Construction 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 Kohinoor Foods and Action Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kohinoor Foods Limited and Action Construction Equipment, you can compare the effects of market volatilities on Kohinoor Foods and Action Construction 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 Kohinoor Foods with a short position of Action Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kohinoor Foods and Action Construction.

Diversification Opportunities for Kohinoor Foods and Action Construction

0.41

Correlation Coefficient

Kohinoor Foods  Action Construction

Very weak diversification

The 3 months correlation between Kohinoor and Action is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kohinoor Foods Limited and Action Construction Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action Construction and Kohinoor Foods 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 Kohinoor Foods Limited are associated (or correlated) with Action Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action Construction has no effect on the direction of Kohinoor Foods i.e., Kohinoor Foods and Action Construction go up and down completely randomly.

Pair Corralation between Kohinoor Foods and Action Construction

Assuming the 90 days trading horizon Kohinoor Foods Limited is expected to under-perform the Action Construction. In addition to that, Kohinoor Foods is 1.17 times more volatile than Action Construction Equipment. It trades about -0.06 of its total potential returns per unit of risk. Action Construction Equipment is currently generating about 0.04 per unit of volatility. If you would invest  138,875  in Action Construction Equipment on September 28, 2024 and sell it today you would earn a total of  6,020  from holding Action Construction Equipment or generate 4.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Kohinoor Foods Limited  vs.  Action Construction Equipment

Kohinoor Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kohinoor Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Action Construction

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Action Construction Equipment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Action Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kohinoor Foods and Action Construction

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

The idea behind Kohinoor Foods Limited and Action Construction Equipment 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.