Correlation Between Kalyani Steels and Sudarshan Chemical

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

Diversification Opportunities for Kalyani Steels and Sudarshan Chemical

0.88

Correlation Coefficient

Kalyani Steels  Sudarshan Chemical

Very poor diversification

The 3 months correlation between Kalyani and Sudarshan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and Sudarshan Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sudarshan Chemical 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 Sudarshan Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sudarshan Chemical has no effect on the direction of Kalyani Steels i.e., Kalyani Steels and Sudarshan Chemical go up and down completely randomly.

Pair Corralation between Kalyani Steels and Sudarshan Chemical

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to under-perform the Sudarshan Chemical. In addition to that, Kalyani Steels is 1.01 times more volatile than Sudarshan Chemical Industries. It trades about -0.2 of its total potential returns per unit of risk. Sudarshan Chemical Industries is currently generating about -0.06 per unit of volatility. If you would invest  112,415  in Sudarshan Chemical Industries on December 29, 2024 and sell it today you would lose (13,395) from holding Sudarshan Chemical Industries or give up 11.92% of portfolio value over 90 days.

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

Kalyani Steels Limited  vs.  Sudarshan Chemical Industries

Kalyani Steels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kalyani Steels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Sudarshan Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sudarshan Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kalyani Steels and Sudarshan Chemical

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

The idea behind Kalyani Steels Limited and Sudarshan Chemical Industries 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.