Correlation Between Rail Vikas and KEC International

Can any of the company-specific risk be diversified away by investing in both Rail Vikas and KEC International 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 Rail Vikas and KEC International into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Rail Vikas and KEC International

-0.07

Correlation Coefficient

Rail Vikas  KEC International

Good diversification

The 3 months correlation between Rail and KEC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rail Vikas Nigam and KEC International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEC International and Rail Vikas 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 Rail Vikas Nigam are associated (or correlated) with KEC International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEC International has no effect on the direction of Rail Vikas i.e., Rail Vikas and KEC International go up and down completely randomly.

Pair Corralation between Rail Vikas and KEC International

Assuming the 90 days trading horizon Rail Vikas Nigam is expected to generate 1.56 times more return on investment than KEC International. However, Rail Vikas is 1.56 times more volatile than KEC International Limited. It trades about 0.12 of its potential returns per unit of risk. KEC International Limited is currently generating about 0.1 per unit of risk. If you would invest  6,721  in Rail Vikas Nigam on October 5, 2024 and sell it today you would earn a total of  36,234  from holding Rail Vikas Nigam or generate 539.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Rail Vikas Nigam  vs.  KEC International Limited

Rail Vikas Nigam

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rail Vikas Nigam has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rail Vikas is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

KEC International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KEC International Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, KEC International exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rail Vikas and KEC International

The main advantage of trading using opposite Rail Vikas and KEC International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rail Vikas position performs unexpectedly, KEC International 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 KEC International will offset losses from the drop in KEC International's long position.

The idea behind Rail Vikas Nigam and KEC International 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.