Correlation Between Total Transport and KNR Constructions

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

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

Diversification Opportunities for Total Transport and KNR Constructions

-0.37

Correlation Coefficient

Total Transport  KNR Constructions

Very good diversification

The 3 months correlation between Total and KNR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Total Transport Systems and KNR Constructions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNR Constructions and Total Transport 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 Total Transport Systems 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 Total Transport i.e., Total Transport and KNR Constructions go up and down completely randomly.

Pair Corralation between Total Transport and KNR Constructions

Assuming the 90 days trading horizon Total Transport Systems is expected to under-perform the KNR Constructions. But the stock apears to be less risky and, when comparing its historical volatility, Total Transport Systems is 1.02 times less risky than KNR Constructions. The stock trades about -0.2 of its potential returns per unit of risk. The KNR Constructions Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  31,960  in KNR Constructions Limited on October 22, 2024 and sell it today you would earn a total of  35.00  from holding KNR Constructions Limited or generate 0.11% return on investment over 90 days.

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

Total Transport Systems  vs.  KNR Constructions Limited

Total Transport Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Transport Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

KNR Constructions

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, KNR Constructions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Total Transport and KNR Constructions

The main advantage of trading using opposite Total Transport and KNR Constructions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Transport 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 Total Transport Systems 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.