Correlation Between Steelcast and KNR Constructions

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

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

Diversification Opportunities for Steelcast and KNR Constructions

0.64

Correlation Coefficient

Steelcast  KNR Constructions

Poor diversification

The 3 months correlation between Steelcast and KNR is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast 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 Steelcast 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 Steelcast 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 Steelcast i.e., Steelcast and KNR Constructions go up and down completely randomly.

Pair Corralation between Steelcast and KNR Constructions

Assuming the 90 days trading horizon Steelcast is expected to generate 1.14 times less return on investment than KNR Constructions. But when comparing it to its historical volatility, Steelcast Limited is 1.14 times less risky than KNR Constructions. It trades about 0.02 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  33,545  in KNR Constructions Limited on October 11, 2024 and sell it today you would earn a total of  125.00  from holding KNR Constructions Limited or generate 0.37% return on investment over 90 days.

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

Steelcast Limited  vs.  KNR Constructions Limited

Steelcast Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

KNR Constructions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, KNR Constructions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Steelcast and KNR Constructions

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

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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 Global Correlations module to find global opportunities by holding instruments from different markets.