Correlation Between Prakash Steelage and KNR Constructions

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

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

Diversification Opportunities for Prakash Steelage and KNR Constructions

0.34

Correlation Coefficient

Prakash Steelage  KNR Constructions

Weak diversification

The 3 months correlation between Prakash and KNR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prakash Steelage 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 Prakash Steelage 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 Prakash Steelage 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 Prakash Steelage i.e., Prakash Steelage and KNR Constructions go up and down completely randomly.

Pair Corralation between Prakash Steelage and KNR Constructions

Assuming the 90 days trading horizon Prakash Steelage Limited is expected to generate 1.49 times more return on investment than KNR Constructions. However, Prakash Steelage is 1.49 times more volatile than KNR Constructions Limited. It trades about 0.05 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about 0.04 per unit of risk. If you would invest  485.00  in Prakash Steelage Limited on October 3, 2024 and sell it today you would earn a total of  316.00  from holding Prakash Steelage Limited or generate 65.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.59%
Values	Daily Returns

Prakash Steelage Limited  vs.  KNR Constructions Limited

Prakash Steelage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prakash Steelage Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

KNR Constructions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, KNR Constructions is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prakash Steelage and KNR Constructions

The main advantage of trading using opposite Prakash Steelage and KNR Constructions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prakash Steelage 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 Prakash Steelage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.