Correlation Between NetSol Technologies and K Electric

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

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

Diversification Opportunities for NetSol Technologies and K Electric

0.76

Correlation Coefficient

NetSol Technologies  K Electric

Poor diversification

The 3 months correlation between NetSol and KEL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding NetSol Technologies and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric and NetSol Technologies 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 NetSol Technologies are associated (or correlated) with K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of NetSol Technologies i.e., NetSol Technologies and K Electric go up and down completely randomly.

Pair Corralation between NetSol Technologies and K Electric

Assuming the 90 days trading horizon NetSol Technologies is expected to generate 0.86 times more return on investment than K Electric. However, NetSol Technologies is 1.16 times less risky than K Electric. It trades about -0.09 of its potential returns per unit of risk. K Electric is currently generating about -0.23 per unit of risk. If you would invest  16,953  in NetSol Technologies on October 10, 2024 and sell it today you would lose (1,261) from holding NetSol Technologies or give up 7.44% of portfolio value over 90 days.

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

NetSol Technologies  vs.  K Electric

NetSol Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NetSol Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

K Electric

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in K Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, K Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetSol Technologies and K Electric

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

The idea behind NetSol Technologies and K Electric 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.