Correlation Between Rajnandini Metal and Kalpataru Projects

Can any of the company-specific risk be diversified away by investing in both Rajnandini Metal 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 Rajnandini Metal and Kalpataru Projects 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 Kalpataru Projects International, you can compare the effects of market volatilities on Rajnandini Metal 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 Rajnandini Metal with a short position of Kalpataru Projects. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rajnandini Metal and Kalpataru Projects.

Diversification Opportunities for Rajnandini Metal and Kalpataru Projects

0.11

Correlation Coefficient

Rajnandini Metal  Kalpataru Projects

Average diversification

The 3 months correlation between Rajnandini and Kalpataru is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Rajnandini Metal 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 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 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 Rajnandini Metal i.e., Rajnandini Metal and Kalpataru Projects go up and down completely randomly.

Pair Corralation between Rajnandini Metal and Kalpataru Projects

Assuming the 90 days trading horizon Rajnandini Metal Limited is expected to under-perform the Kalpataru Projects. In addition to that, Rajnandini Metal is 1.1 times more volatile than Kalpataru Projects International. It trades about -0.21 of its total potential returns per unit of risk. Kalpataru Projects International is currently generating about 0.23 per unit of volatility. If you would invest  114,965  in Kalpataru Projects International on October 4, 2024 and sell it today you would earn a total of  12,645  from holding Kalpataru Projects International or generate 11.0% 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.  Kalpataru Projects Internation

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 latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 comparatively stable basic indicators, Kalpataru Projects is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rajnandini Metal and Kalpataru Projects

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.