Correlation Between Kalpataru Projects and NCC

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

By analyzing existing cross correlation between Kalpataru Projects International and NCC Limited, you can compare the effects of market volatilities on Kalpataru Projects and NCC 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 Kalpataru Projects with a short position of NCC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kalpataru Projects and NCC.

Diversification Opportunities for Kalpataru Projects and NCC

0.3

Correlation Coefficient

Kalpataru Projects  NCC

Weak diversification

The 3 months correlation between Kalpataru and NCC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kalpataru Projects Internation and NCC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCC Limited and Kalpataru Projects 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 Kalpataru Projects International are associated (or correlated) with NCC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCC Limited has no effect on the direction of Kalpataru Projects i.e., Kalpataru Projects and NCC go up and down completely randomly.

Pair Corralation between Kalpataru Projects and NCC

Assuming the 90 days trading horizon Kalpataru Projects is expected to generate 1.05 times less return on investment than NCC. But when comparing it to its historical volatility, Kalpataru Projects International is 1.28 times less risky than NCC. It trades about 0.11 of its potential returns per unit of risk. NCC Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,818  in NCC Limited on October 5, 2024 and sell it today you would earn a total of  17,572  from holding NCC Limited or generate 178.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.12%
Values	Daily Returns

Kalpataru Projects Internation  vs.  NCC Limited

Kalpataru Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalpataru Projects International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kalpataru Projects is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

NCC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NCC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kalpataru Projects and NCC

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

The idea behind Kalpataru Projects International and NCC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..