Correlation Between Malu Paper and Kalpataru Projects

Can any of the company-specific risk be diversified away by investing in both Malu Paper and Kalpataru Projects 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 Malu Paper and Kalpataru Projects into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Malu Paper Mills and Kalpataru Projects International, you can compare the effects of market volatilities on Malu Paper and Kalpataru Projects 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 Malu Paper with a short position of Kalpataru Projects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malu Paper and Kalpataru Projects.

Diversification Opportunities for Malu Paper and Kalpataru Projects

0.54

Correlation Coefficient

Malu Paper  Kalpataru Projects

Very weak diversification

The 3 months correlation between Malu and Kalpataru is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Malu Paper Mills and Kalpataru Projects Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalpataru Projects and Malu Paper 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 Malu Paper Mills are associated (or correlated) with Kalpataru Projects. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalpataru Projects has no effect on the direction of Malu Paper i.e., Malu Paper and Kalpataru Projects go up and down completely randomly.

Pair Corralation between Malu Paper and Kalpataru Projects

Assuming the 90 days trading horizon Malu Paper Mills is expected to generate 1.65 times more return on investment than Kalpataru Projects. However, Malu Paper is 1.65 times more volatile than Kalpataru Projects International. It trades about 0.05 of its potential returns per unit of risk. Kalpataru Projects International is currently generating about 0.04 per unit of risk. If you would invest  4,580  in Malu Paper Mills on September 19, 2024 and sell it today you would earn a total of  219.00  from holding Malu Paper Mills or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Malu Paper Mills  vs.  Kalpataru Projects Internation

Malu Paper Mills

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Malu Paper Mills are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Malu Paper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kalpataru Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kalpataru Projects International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kalpataru Projects 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 Malu Paper and Kalpataru Projects

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

The idea behind Malu Paper Mills and Kalpataru Projects International 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.