Correlation Between Praj Industries and Kalpataru Projects

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

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

Diversification Opportunities for Praj Industries and Kalpataru Projects

0.36

Correlation Coefficient

Praj Industries  Kalpataru Projects

Weak diversification

The 3 months correlation between Praj and Kalpataru is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Praj Industries Limited and Kalpataru Projects Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalpataru Projects and Praj Industries 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 Praj Industries Limited 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 Praj Industries i.e., Praj Industries and Kalpataru Projects go up and down completely randomly.

Pair Corralation between Praj Industries and Kalpataru Projects

Assuming the 90 days trading horizon Praj Industries Limited is expected to generate 1.33 times more return on investment than Kalpataru Projects. However, Praj Industries is 1.33 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 -0.03 per unit of risk. If you would invest  70,670  in Praj Industries Limited on October 20, 2024 and sell it today you would earn a total of  8,995  from holding Praj Industries Limited or generate 12.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Praj Industries Limited  vs.  Kalpataru Projects Internation

Praj Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Praj Industries Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Praj Industries is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Praj Industries and Kalpataru Projects

The main advantage of trading using opposite Praj Industries and Kalpataru Projects positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Praj Industries 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 Praj Industries Limited 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.