Correlation Between Maharashtra Scooters and KNR Constructions

Can any of the company-specific risk be diversified away by investing in both Maharashtra Scooters and KNR Constructions 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 Maharashtra Scooters and KNR Constructions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Maharashtra Scooters Limited and KNR Constructions Limited, you can compare the effects of market volatilities on Maharashtra Scooters and KNR Constructions 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 Maharashtra Scooters with a short position of KNR Constructions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Maharashtra Scooters and KNR Constructions.

Diversification Opportunities for Maharashtra Scooters and KNR Constructions

-0.06

Correlation Coefficient

Maharashtra Scooters  KNR Constructions

Good diversification

The 3 months correlation between Maharashtra and KNR is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Maharashtra Scooters Limited and KNR Constructions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNR Constructions and Maharashtra Scooters 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 Maharashtra Scooters Limited are associated (or correlated) with KNR Constructions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNR Constructions has no effect on the direction of Maharashtra Scooters i.e., Maharashtra Scooters and KNR Constructions go up and down completely randomly.

Pair Corralation between Maharashtra Scooters and KNR Constructions

Assuming the 90 days trading horizon Maharashtra Scooters Limited is expected to generate 0.48 times more return on investment than KNR Constructions. However, Maharashtra Scooters Limited is 2.07 times less risky than KNR Constructions. It trades about 0.08 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about -0.13 per unit of risk. If you would invest  944,130  in Maharashtra Scooters Limited on September 28, 2024 and sell it today you would earn a total of  11,400  from holding Maharashtra Scooters Limited or generate 1.21% return on investment over 90 days.

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

Maharashtra Scooters Limited  vs.  KNR Constructions Limited

Maharashtra Scooters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maharashtra Scooters Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

KNR Constructions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNR Constructions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Maharashtra Scooters and KNR Constructions

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

The idea behind Maharashtra Scooters Limited and KNR Constructions 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.