Correlation Between Tarapur Transformers and Kewal Kiran

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

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

Diversification Opportunities for Tarapur Transformers and Kewal Kiran

-0.64

Correlation Coefficient

Tarapur Transformers  Kewal Kiran

Excellent diversification

The 3 months correlation between Tarapur and Kewal is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tarapur Transformers Limited and Kewal Kiran Clothing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kewal Kiran Clothing and Tarapur Transformers 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 Tarapur Transformers Limited are associated (or correlated) with Kewal Kiran. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kewal Kiran Clothing has no effect on the direction of Tarapur Transformers i.e., Tarapur Transformers and Kewal Kiran go up and down completely randomly.

Pair Corralation between Tarapur Transformers and Kewal Kiran

Assuming the 90 days trading horizon Tarapur Transformers Limited is expected to generate 1.45 times more return on investment than Kewal Kiran. However, Tarapur Transformers is 1.45 times more volatile than Kewal Kiran Clothing. It trades about 0.34 of its potential returns per unit of risk. Kewal Kiran Clothing is currently generating about -0.06 per unit of risk. If you would invest  475.00  in Tarapur Transformers Limited on October 11, 2024 and sell it today you would earn a total of  4,217  from holding Tarapur Transformers Limited or generate 887.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.95%
Values	Daily Returns

Tarapur Transformers Limited  vs.  Kewal Kiran Clothing

Tarapur Transformers

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tarapur Transformers Limited are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Tarapur Transformers reported solid returns over the last few months and may actually be approaching a breakup point.

Kewal Kiran Clothing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kewal Kiran Clothing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Tarapur Transformers and Kewal Kiran

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

The idea behind Tarapur Transformers Limited and Kewal Kiran Clothing 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.