Correlation Between Kalyani Steels and City Union

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

By analyzing existing cross correlation between Kalyani Steels Limited and City Union Bank, you can compare the effects of market volatilities on Kalyani Steels and City Union 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 Kalyani Steels with a short position of City Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kalyani Steels and City Union.

Diversification Opportunities for Kalyani Steels and City Union

0.42

Correlation Coefficient

Kalyani Steels  City Union

Very weak diversification

The 3 months correlation between Kalyani and City is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and City Union Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Union Bank and Kalyani Steels 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 Kalyani Steels Limited are associated (or correlated) with City Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Union Bank has no effect on the direction of Kalyani Steels i.e., Kalyani Steels and City Union go up and down completely randomly.

Pair Corralation between Kalyani Steels and City Union

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to generate 3.12 times more return on investment than City Union. However, Kalyani Steels is 3.12 times more volatile than City Union Bank. It trades about 0.5 of its potential returns per unit of risk. City Union Bank is currently generating about 0.02 per unit of risk. If you would invest  77,450  in Kalyani Steels Limited on September 26, 2024 and sell it today you would earn a total of  42,425  from holding Kalyani Steels Limited or generate 54.78% return on investment over 90 days.

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

Kalyani Steels Limited  vs.  City Union Bank

Kalyani Steels

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

City Union Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in City Union Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, City Union may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kalyani Steels and City Union

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

The idea behind Kalyani Steels Limited and City Union Bank 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.