Correlation Between Kalyani Steels and Vraj Iron

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

Diversification Opportunities for Kalyani Steels and Vraj Iron

0.02

Correlation Coefficient

Kalyani Steels  Vraj Iron

Significant diversification

The 3 months correlation between Kalyani and Vraj is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Steels Limited and Vraj Iron and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vraj Iron 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 Vraj Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vraj Iron has no effect on the direction of Kalyani Steels i.e., Kalyani Steels and Vraj Iron go up and down completely randomly.

Pair Corralation between Kalyani Steels and Vraj Iron

Assuming the 90 days trading horizon Kalyani Steels Limited is expected to under-perform the Vraj Iron. But the stock apears to be less risky and, when comparing its historical volatility, Kalyani Steels Limited is 1.11 times less risky than Vraj Iron. The stock trades about -0.44 of its potential returns per unit of risk. The Vraj Iron and is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  22,345  in Vraj Iron and on October 27, 2024 and sell it today you would lose (3,033) from holding Vraj Iron and or give up 13.57% of portfolio value over 90 days.

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

Kalyani Steels Limited  vs.  Vraj Iron and

Kalyani Steels

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Steels Limited are ranked lower than 8 (%) 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.

Vraj Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vraj Iron and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Kalyani Steels and Vraj Iron

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

The idea behind Kalyani Steels Limited and Vraj Iron and 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.