Correlation Between KSB Pumps and IBL HealthCare
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and IBL HealthCare 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 KSB Pumps and IBL HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and IBL HealthCare, you can compare the effects of market volatilities on KSB Pumps and IBL HealthCare 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 KSB Pumps with a short position of IBL HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and IBL HealthCare.
Diversification Opportunities for KSB Pumps and IBL HealthCare
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KSB and IBL is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and IBL HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBL HealthCare and KSB Pumps 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 KSB Pumps are associated (or correlated) with IBL HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBL HealthCare has no effect on the direction of KSB Pumps i.e., KSB Pumps and IBL HealthCare go up and down completely randomly.
Pair Corralation between KSB Pumps and IBL HealthCare
Assuming the 90 days trading horizon KSB Pumps is expected to generate 4.36 times less return on investment than IBL HealthCare. But when comparing it to its historical volatility, KSB Pumps is 1.46 times less risky than IBL HealthCare. It trades about 0.11 of its potential returns per unit of risk. IBL HealthCare is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,995 in IBL HealthCare on August 27, 2024 and sell it today you would earn a total of 954.00 from holding IBL HealthCare or generate 31.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KSB Pumps vs. IBL HealthCare
Performance |
| Timeline |
| KSB Pumps |
| IBL HealthCare |
KSB Pumps and IBL HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and IBL HealthCare
The main advantage of trading using opposite KSB Pumps and IBL HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, IBL HealthCare 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 IBL HealthCare will offset losses from the drop in IBL HealthCare's long position.| KSB Pumps vs. The Organic Meat | KSB Pumps vs. National Foods | KSB Pumps vs. Askari General Insurance | KSB Pumps vs. Unilever Pakistan Foods |
| IBL HealthCare vs. Masood Textile Mills | IBL HealthCare vs. Fauji Foods | IBL HealthCare vs. KSB Pumps | IBL HealthCare vs. Mari Petroleum |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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