Correlation Between Sardar Chemical and K Electric

Can any of the company-specific risk be diversified away by investing in both Sardar Chemical and K Electric 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 Sardar Chemical and K Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sardar Chemical Industries and K Electric, you can compare the effects of market volatilities on Sardar Chemical and K Electric 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 Sardar Chemical with a short position of K Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sardar Chemical and K Electric.

Diversification Opportunities for Sardar Chemical and K Electric

0.21

Correlation Coefficient

Sardar Chemical  K Electric

Modest diversification

The 3 months correlation between Sardar and KEL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sardar Chemical Industries and K Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Electric and Sardar Chemical 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 Sardar Chemical Industries are associated (or correlated) with K Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Electric has no effect on the direction of Sardar Chemical i.e., Sardar Chemical and K Electric go up and down completely randomly.

Pair Corralation between Sardar Chemical and K Electric

Assuming the 90 days trading horizon Sardar Chemical Industries is expected to generate 1.06 times more return on investment than K Electric. However, Sardar Chemical is 1.06 times more volatile than K Electric. It trades about -0.25 of its potential returns per unit of risk. K Electric is currently generating about -0.37 per unit of risk. If you would invest  3,667  in Sardar Chemical Industries on October 24, 2024 and sell it today you would lose (417.00) from holding Sardar Chemical Industries or give up 11.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Sardar Chemical Industries  vs.  K Electric

Sardar Chemical Indu

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sardar Chemical Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sardar Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

K Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, K Electric is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sardar Chemical and K Electric

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

The idea behind Sardar Chemical Industries and K Electric 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.