Correlation Between KSB Pumps and Tata Textile
Can any of the company-specific risk be diversified away by investing in both KSB Pumps and Tata Textile 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 Tata Textile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Tata Textile Mills, you can compare the effects of market volatilities on KSB Pumps and Tata Textile 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 Tata Textile. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Tata Textile.
Diversification Opportunities for KSB Pumps and Tata Textile
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between KSB and Tata is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and Tata Textile Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Textile Mills 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 Tata Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Textile Mills has no effect on the direction of KSB Pumps i.e., KSB Pumps and Tata Textile go up and down completely randomly.
Pair Corralation between KSB Pumps and Tata Textile
Assuming the 90 days trading horizon KSB Pumps is expected to generate 0.92 times more return on investment than Tata Textile. However, KSB Pumps is 1.09 times less risky than Tata Textile. It trades about 0.04 of its potential returns per unit of risk. Tata Textile Mills is currently generating about 0.02 per unit of risk. If you would invest 11,600 in KSB Pumps on September 13, 2024 and sell it today you would earn a total of 4,362 from holding KSB Pumps or generate 37.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 74.07% |
| Values | Daily Returns |
KSB Pumps vs. Tata Textile Mills
Performance |
| Timeline |
| KSB Pumps |
| Tata Textile Mills |
KSB Pumps and Tata Textile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Tata Textile
The main advantage of trading using opposite KSB Pumps and Tata Textile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps position performs unexpectedly, Tata Textile 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 Tata Textile will offset losses from the drop in Tata Textile's long position.| KSB Pumps vs. Masood Textile Mills | KSB Pumps vs. Fauji Foods | KSB Pumps vs. Mari Petroleum | KSB Pumps vs. Loads |
| Tata Textile vs. Roshan Packages | Tata Textile vs. Nimir Industrial Chemical | Tata Textile vs. Hi Tech Lubricants | Tata Textile 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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