Correlation Between Pilani Investment and KEI Industries

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

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

Diversification Opportunities for Pilani Investment and KEI Industries

-0.55

Correlation Coefficient

Pilani Investment  KEI Industries

Excellent diversification

The 3 months correlation between Pilani and KEI is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Pilani Investment and and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries and Pilani Investment 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 Pilani Investment and are associated (or correlated) with KEI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEI Industries has no effect on the direction of Pilani Investment i.e., Pilani Investment and KEI Industries go up and down completely randomly.

Pair Corralation between Pilani Investment and KEI Industries

Assuming the 90 days trading horizon Pilani Investment and is expected to under-perform the KEI Industries. But the stock apears to be less risky and, when comparing its historical volatility, Pilani Investment and is 1.09 times less risky than KEI Industries. The stock trades about -0.75 of its potential returns per unit of risk. The KEI Industries Limited is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  446,980  in KEI Industries Limited on October 15, 2024 and sell it today you would lose (29,275) from holding KEI Industries Limited or give up 6.55% of portfolio value over 90 days.

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

Pilani Investment and  vs.  KEI Industries Limited

Pilani Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pilani Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

KEI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEI Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Pilani Investment and KEI Industries

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

The idea behind Pilani Investment and and KEI Industries 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.