Correlation Between KSB Pumps and NetSol Technologies

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Can any of the company-specific risk be diversified away by investing in both KSB Pumps and NetSol Technologies 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 NetSol Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and NetSol Technologies, you can compare the effects of market volatilities on KSB Pumps and NetSol Technologies 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 NetSol Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and NetSol Technologies.

Diversification Opportunities for KSB Pumps and NetSol Technologies

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between KSB and NetSol is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of KSB Pumps i.e., KSB Pumps and NetSol Technologies go up and down completely randomly.

Pair Corralation between KSB Pumps and NetSol Technologies

Assuming the 90 days trading horizon KSB Pumps is expected to generate 1.65 times more return on investment than NetSol Technologies. However, KSB Pumps is 1.65 times more volatile than NetSol Technologies. It trades about 0.18 of its potential returns per unit of risk. NetSol Technologies is currently generating about 0.26 per unit of risk. If you would invest  12,500  in KSB Pumps on August 31, 2024 and sell it today you would earn a total of  1,430  from holding KSB Pumps or generate 11.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

KSB Pumps  vs.  NetSol Technologies

 Performance 
       Timeline  
KSB Pumps 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSB Pumps may actually be approaching a critical reversion point that can send shares even higher in December 2024.
NetSol Technologies 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NetSol Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NetSol Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

KSB Pumps and NetSol Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KSB Pumps and NetSol Technologies

The main advantage of trading using opposite KSB Pumps and NetSol Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, NetSol Technologies 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 NetSol Technologies will offset losses from the drop in NetSol Technologies' long position.
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The idea behind KSB Pumps and NetSol Technologies 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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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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