Correlation Between Reliance Industrial and KEI Industries

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

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

Diversification Opportunities for Reliance Industrial and KEI Industries

0.68

Correlation Coefficient

Reliance Industrial  KEI Industries

Poor diversification

The 3 months correlation between Reliance and KEI is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industrial Infrastruc and KEI Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEI Industries and Reliance Industrial 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 Reliance Industrial Infrastructure 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 Reliance Industrial i.e., Reliance Industrial and KEI Industries go up and down completely randomly.

Pair Corralation between Reliance Industrial and KEI Industries

Assuming the 90 days trading horizon Reliance Industrial Infrastructure is expected to under-perform the KEI Industries. In addition to that, Reliance Industrial is 1.48 times more volatile than KEI Industries Limited. It trades about -0.06 of its total potential returns per unit of risk. KEI Industries Limited is currently generating about -0.07 per unit of volatility. If you would invest  469,065  in KEI Industries Limited on October 15, 2024 and sell it today you would lose (51,360) from holding KEI Industries Limited or give up 10.95% of portfolio value over 90 days.

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

Reliance Industrial Infrastruc  vs.  KEI Industries Limited

Reliance Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industrial Infrastructure 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.

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 Reliance Industrial and KEI Industries

The main advantage of trading using opposite Reliance Industrial and KEI Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industrial 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 Reliance Industrial Infrastructure 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.