Correlation Between Kalyani Steels and Metropolis Healthcare

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

Diversification Opportunities for Kalyani Steels and Metropolis Healthcare

0.22

Correlation Coefficient

Kalyani Steels  Metropolis Healthcare

Modest diversification

The 3 months correlation between Kalyani and Metropolis is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and Metropolis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolis Healthcare 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 Metropolis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolis Healthcare has no effect on the direction of Kalyani Steels i.e., Kalyani Steels and Metropolis Healthcare go up and down completely randomly.

Pair Corralation between Kalyani Steels and Metropolis Healthcare

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to generate 1.47 times more return on investment than Metropolis Healthcare. However, Kalyani Steels is 1.47 times more volatile than Metropolis Healthcare Limited. It trades about 0.1 of its potential returns per unit of risk. Metropolis Healthcare Limited is currently generating about 0.06 per unit of risk. If you would invest  36,249  in Kalyani Steels Limited on September 21, 2024 and sell it today you would earn a total of  87,066  from holding Kalyani Steels Limited or generate 240.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Kalyani Steels Limited  vs.  Metropolis Healthcare Limited

Kalyani Steels

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Kalyani Steels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Metropolis Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolis Healthcare Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Metropolis Healthcare is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kalyani Steels and Metropolis Healthcare

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

The idea behind Kalyani Steels Limited and Metropolis Healthcare 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.