Correlation Between MRF and KNR Constructions

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

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

Diversification Opportunities for MRF and KNR Constructions

0.79

Correlation Coefficient

MRF  KNR Constructions

Poor diversification

The 3 months correlation between MRF and KNR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding MRF 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 MRF 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 MRF 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 MRF i.e., MRF and KNR Constructions go up and down completely randomly.

Pair Corralation between MRF and KNR Constructions

Assuming the 90 days trading horizon MRF Limited is expected to generate 0.68 times more return on investment than KNR Constructions. However, MRF Limited is 1.47 times less risky than KNR Constructions. It trades about 0.24 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  12,453,400  in MRF Limited on September 28, 2024 and sell it today you would earn a total of  667,000  from holding MRF Limited or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

MRF Limited  vs.  KNR Constructions Limited

MRF Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MRF Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MRF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 MRF and KNR Constructions

The main advantage of trading using opposite MRF and KNR Constructions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRF 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 MRF 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.