Correlation Between KSB Pumps and EFU General

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

By analyzing existing cross correlation between KSB Pumps and EFU General Insurance, you can compare the effects of market volatilities on KSB Pumps and EFU General 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 KSB Pumps with a short position of EFU General. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and EFU General.

Diversification Opportunities for KSB Pumps and EFU General

-0.18

Correlation Coefficient

KSB Pumps  EFU General

Good diversification

The 3 months correlation between KSB and EFU is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and EFU General Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EFU General Insurance and KSB Pumps 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 KSB Pumps are associated (or correlated) with EFU General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EFU General Insurance has no effect on the direction of KSB Pumps i.e., KSB Pumps and EFU General go up and down completely randomly.

Pair Corralation between KSB Pumps and EFU General

Assuming the 90 days trading horizon KSB Pumps is expected to generate 0.94 times more return on investment than EFU General. However, KSB Pumps is 1.07 times less risky than EFU General. It trades about -0.01 of its potential returns per unit of risk. EFU General Insurance is currently generating about -0.02 per unit of risk. If you would invest  15,368  in KSB Pumps on December 3, 2024 and sell it today you would lose (418.00) from holding KSB Pumps or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

KSB Pumps  vs.  EFU General Insurance

KSB Pumps

Risk-Adjusted Performance

Very Weak

Over the last 90 days KSB Pumps has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KSB Pumps is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EFU General Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days EFU General Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EFU General is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KSB Pumps and EFU General

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

The idea behind KSB Pumps and EFU General Insurance 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.