Correlation Between Kohinoor Foods and Indian Railway

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

Diversification Opportunities for Kohinoor Foods and Indian Railway

0.32

Correlation Coefficient

Kohinoor Foods  Indian Railway

Weak diversification

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

Pair Corralation between Kohinoor Foods and Indian Railway

Assuming the 90 days trading horizon Kohinoor Foods is expected to generate 22.62 times less return on investment than Indian Railway. In addition to that, Kohinoor Foods is 1.01 times more volatile than Indian Railway Finance. It trades about 0.0 of its total potential returns per unit of risk. Indian Railway Finance is currently generating about 0.06 per unit of volatility. If you would invest  10,229  in Indian Railway Finance on October 6, 2024 and sell it today you would earn a total of  5,141  from holding Indian Railway Finance or generate 50.26% return on investment over 90 days.

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

Kohinoor Foods Limited  vs.  Indian Railway Finance

Kohinoor Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kohinoor Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Kohinoor Foods is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Indian Railway Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indian Railway Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Indian Railway may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kohinoor Foods and Indian Railway

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

The idea behind Kohinoor Foods Limited and Indian Railway Finance 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.