Correlation Between KSB Pumps and National Refinery

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

By analyzing existing cross correlation between KSB Pumps and National Refinery, you can compare the effects of market volatilities on KSB Pumps and National Refinery 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 National Refinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and National Refinery.

Diversification Opportunities for KSB Pumps and National Refinery

0.19

Correlation Coefficient

KSB Pumps  National Refinery

Average diversification

The 3 months correlation between KSB and National is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and National Refinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Refinery 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 National Refinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Refinery has no effect on the direction of KSB Pumps i.e., KSB Pumps and National Refinery go up and down completely randomly.

Pair Corralation between KSB Pumps and National Refinery

Assuming the 90 days trading horizon KSB Pumps is expected to generate 0.8 times more return on investment than National Refinery. However, KSB Pumps is 1.25 times less risky than National Refinery. It trades about 0.06 of its potential returns per unit of risk. National Refinery is currently generating about -0.07 per unit of risk. If you would invest  15,054  in KSB Pumps on December 30, 2024 and sell it today you would earn a total of  914.00  from holding KSB Pumps or generate 6.07% return on investment over 90 days.

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

KSB Pumps  vs.  National Refinery

KSB Pumps

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSB Pumps may actually be approaching a critical reversion point that can send shares even higher in April 2025.

National Refinery

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Refinery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with KSB Pumps and National Refinery

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

The idea behind KSB Pumps and National Refinery 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.