Correlation Between Rajnandini Metal and KNR Constructions

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

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

Diversification Opportunities for Rajnandini Metal and KNR Constructions

0.13

Correlation Coefficient

Rajnandini Metal  KNR Constructions

Average diversification

The 3 months correlation between Rajnandini and KNR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal 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 Rajnandini Metal 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 Rajnandini Metal 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 Rajnandini Metal i.e., Rajnandini Metal and KNR Constructions go up and down completely randomly.

Pair Corralation between Rajnandini Metal and KNR Constructions

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the KNR Constructions. In addition to that, Rajnandini Metal is 1.59 times more volatile than KNR Constructions Limited. It trades about -0.04 of its total potential returns per unit of risk. KNR Constructions Limited is currently generating about 0.03 per unit of volatility. If you would invest  26,457  in KNR Constructions Limited on September 21, 2024 and sell it today you would earn a total of  7,138  from holding KNR Constructions Limited or generate 26.98% return on investment over 90 days.

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

Rajnandini Metal Limited  vs.  KNR Constructions Limited

Rajnandini Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rajnandini Metal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

KNR Constructions

Risk-Adjusted Performance

2 of 100

Insignificant

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rajnandini Metal and KNR Constructions

The main advantage of trading using opposite Rajnandini Metal and KNR Constructions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rajnandini Metal 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 Rajnandini Metal 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.