Correlation Between Wipro and KNR Constructions

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

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

Diversification Opportunities for Wipro and KNR Constructions

-0.47

Correlation Coefficient

Wipro  KNR Constructions

Very good diversification

The 3 months correlation between Wipro and KNR is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Wipro 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 Wipro 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 Wipro 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 Wipro i.e., Wipro and KNR Constructions go up and down completely randomly.

Pair Corralation between Wipro and KNR Constructions

Assuming the 90 days trading horizon Wipro Limited is expected to generate 0.65 times more return on investment than KNR Constructions. However, Wipro Limited is 1.55 times less risky than KNR Constructions. It trades about 0.13 of its potential returns per unit of risk. KNR Constructions Limited is currently generating about -0.03 per unit of risk. If you would invest  51,965  in Wipro Limited on September 4, 2024 and sell it today you would earn a total of  6,490  from holding Wipro Limited or generate 12.49% return on investment over 90 days.

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

Wipro Limited  vs.  KNR Constructions Limited

Wipro Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Wipro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KNR Constructions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNR Constructions Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, KNR Constructions is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wipro and KNR Constructions

The main advantage of trading using opposite Wipro and KNR Constructions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro 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 Wipro 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.