Correlation Between Kalyani Steels and IG Petrochemicals

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

Diversification Opportunities for Kalyani Steels and IG Petrochemicals

0.41

Correlation Coefficient

Kalyani Steels  IG Petrochemicals

Very weak diversification

The 3 months correlation between Kalyani and IGPL is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and IG Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IG Petrochemicals 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 IG Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IG Petrochemicals has no effect on the direction of Kalyani Steels i.e., Kalyani Steels and IG Petrochemicals go up and down completely randomly.

Pair Corralation between Kalyani Steels and IG Petrochemicals

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to generate 1.22 times more return on investment than IG Petrochemicals. However, Kalyani Steels is 1.22 times more volatile than IG Petrochemicals Limited. It trades about 0.11 of its potential returns per unit of risk. IG Petrochemicals Limited is currently generating about 0.02 per unit of risk. If you would invest  34,894  in Kalyani Steels Limited on September 20, 2024 and sell it today you would earn a total of  90,016  from holding Kalyani Steels Limited or generate 257.97% 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.  IG Petrochemicals Limited

Kalyani Steels

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

IG Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kalyani Steels and IG Petrochemicals

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

The idea behind Kalyani Steels Limited and IG Petrochemicals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.