Correlation Between Kalyani Steels and Gujarat Fluorochemicals

Can any of the company-specific risk be diversified away by investing in both Kalyani Steels and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals 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 Gujarat Fluorochemicals Limited, you can compare the effects of market volatilities on Kalyani Steels and Gujarat Fluorochemicals 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 Gujarat Fluorochemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kalyani Steels and Gujarat Fluorochemicals.

Diversification Opportunities for Kalyani Steels and Gujarat Fluorochemicals

0.28

Correlation Coefficient

Kalyani Steels  Gujarat Fluorochemicals

Modest diversification

The 3 months correlation between Kalyani and Gujarat is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and Gujarat Fluorochemicals Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Fluorochemicals 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 Gujarat Fluorochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Fluorochemicals has no effect on the direction of Kalyani Steels i.e., Kalyani Steels and Gujarat Fluorochemicals go up and down completely randomly.

Pair Corralation between Kalyani Steels and Gujarat Fluorochemicals

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to generate 1.04 times more return on investment than Gujarat Fluorochemicals. However, Kalyani Steels is 1.04 times more volatile than Gujarat Fluorochemicals Limited. It trades about 0.15 of its potential returns per unit of risk. Gujarat Fluorochemicals Limited is currently generating about 0.04 per unit of risk. If you would invest  80,005  in Kalyani Steels Limited on September 12, 2024 and sell it today you would earn a total of  19,855  from holding Kalyani Steels Limited or generate 24.82% return on investment over 90 days.

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

Kalyani Steels Limited  vs.  Gujarat Fluorochemicals Limite

Kalyani Steels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 12 (%) 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.

Gujarat Fluorochemicals

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Fluorochemicals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Gujarat Fluorochemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kalyani Steels and Gujarat Fluorochemicals

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

The idea behind Kalyani Steels Limited and Gujarat Fluorochemicals 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 Transaction History module to view history of all your transactions and understand their impact on performance.