Correlation Between NSL Foods and Kingsmen CMTI

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

By analyzing existing cross correlation between NSL Foods Public and Kingsmen CMTI Public, you can compare the effects of market volatilities on NSL Foods and Kingsmen CMTI 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 NSL Foods with a short position of Kingsmen CMTI. Check out your portfolio center. Please also check ongoing floating volatility patterns of NSL Foods and Kingsmen CMTI.

Diversification Opportunities for NSL Foods and Kingsmen CMTI

0.04

Correlation Coefficient

NSL Foods  Kingsmen CMTI

Significant diversification

The 3 months correlation between NSL and Kingsmen is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NSL Foods Public and Kingsmen CMTI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsmen CMTI Public and NSL Foods 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 NSL Foods Public are associated (or correlated) with Kingsmen CMTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsmen CMTI Public has no effect on the direction of NSL Foods i.e., NSL Foods and Kingsmen CMTI go up and down completely randomly.

Pair Corralation between NSL Foods and Kingsmen CMTI

Assuming the 90 days trading horizon NSL Foods Public is expected to under-perform the Kingsmen CMTI. In addition to that, NSL Foods is 1.22 times more volatile than Kingsmen CMTI Public. It trades about -0.04 of its total potential returns per unit of risk. Kingsmen CMTI Public is currently generating about 0.14 per unit of volatility. If you would invest  121.00  in Kingsmen CMTI Public on December 28, 2024 and sell it today you would earn a total of  24.00  from holding Kingsmen CMTI Public or generate 19.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

NSL Foods Public  vs.  Kingsmen CMTI Public

NSL Foods Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days NSL Foods Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, NSL Foods is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kingsmen CMTI Public

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsmen CMTI Public are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Kingsmen CMTI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NSL Foods and Kingsmen CMTI

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

The idea behind NSL Foods Public and Kingsmen CMTI Public 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.