Correlation Between Vibhor Steel and Khaitan Chemicals

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

By analyzing existing cross correlation between Vibhor Steel Tubes and Khaitan Chemicals Fertilizers, you can compare the effects of market volatilities on Vibhor Steel and Khaitan Chemicals 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 Vibhor Steel with a short position of Khaitan Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vibhor Steel and Khaitan Chemicals.

Diversification Opportunities for Vibhor Steel and Khaitan Chemicals

0.87

Correlation Coefficient

Vibhor Steel  Khaitan Chemicals

Very poor diversification

The 3 months correlation between Vibhor and Khaitan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vibhor Steel Tubes and Khaitan Chemicals Fertilizers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khaitan Chemicals and Vibhor Steel 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 Vibhor Steel Tubes are associated (or correlated) with Khaitan Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khaitan Chemicals has no effect on the direction of Vibhor Steel i.e., Vibhor Steel and Khaitan Chemicals go up and down completely randomly.

Pair Corralation between Vibhor Steel and Khaitan Chemicals

Assuming the 90 days trading horizon Vibhor Steel Tubes is expected to generate 1.39 times more return on investment than Khaitan Chemicals. However, Vibhor Steel is 1.39 times more volatile than Khaitan Chemicals Fertilizers. It trades about -0.06 of its potential returns per unit of risk. Khaitan Chemicals Fertilizers is currently generating about -0.15 per unit of risk. If you would invest  21,413  in Vibhor Steel Tubes on December 26, 2024 and sell it today you would lose (4,628) from holding Vibhor Steel Tubes or give up 21.61% of portfolio value over 90 days.

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

Vibhor Steel Tubes  vs.  Khaitan Chemicals Fertilizers

Vibhor Steel Tubes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vibhor Steel Tubes 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Khaitan Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Khaitan Chemicals Fertilizers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Vibhor Steel and Khaitan Chemicals

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

The idea behind Vibhor Steel Tubes and Khaitan Chemicals Fertilizers 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.