Correlation Between KSB Pumps and Mari Petroleum
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Mari Petroleum 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 Mari Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Mari Petroleum, you can compare the effects of market volatilities on KSB Pumps and Mari Petroleum 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 Mari Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Mari Petroleum.
Diversification Opportunities for KSB Pumps and Mari Petroleum
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KSB and Mari is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum 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 Mari Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mari Petroleum has no effect on the direction of KSB Pumps i.e., KSB Pumps and Mari Petroleum go up and down completely randomly.
Pair Corralation between KSB Pumps and Mari Petroleum
Assuming the 90 days trading horizon KSB Pumps is expected to generate 1.12 times more return on investment than Mari Petroleum. However, KSB Pumps is 1.12 times more volatile than Mari Petroleum. It trades about 0.15 of its potential returns per unit of risk. Mari Petroleum is currently generating about -0.02 per unit of risk. If you would invest 14,510 in KSB Pumps on October 21, 2024 and sell it today you would earn a total of 1,021 from holding KSB Pumps or generate 7.04% 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. Mari Petroleum
Performance |
| Timeline |
| KSB Pumps |
| Mari Petroleum |
KSB Pumps and Mari Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Mari Petroleum
The main advantage of trading using opposite KSB Pumps and Mari Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Mari Petroleum 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 Mari Petroleum will offset losses from the drop in Mari Petroleum's long position.| KSB Pumps vs. Atlas Insurance | KSB Pumps vs. Habib Insurance | KSB Pumps vs. Askari General Insurance | KSB Pumps vs. Reliance Insurance Co |
| Mari Petroleum vs. Unilever Pakistan Foods | Mari Petroleum vs. Sardar Chemical Industries | Mari Petroleum vs. Fauji Foods | Mari Petroleum vs. Big Bird Foods |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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