Correlation Between National Foods and KSB Pumps
Can any of the company-specific risk be diversified away by investing in both National Foods and KSB Pumps 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 National Foods and KSB Pumps into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Foods and KSB Pumps, you can compare the effects of market volatilities on National Foods and KSB Pumps 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 National Foods with a short position of KSB Pumps. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Foods and KSB Pumps.
Diversification Opportunities for National Foods and KSB Pumps
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between National and KSB is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding National Foods and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps and National Foods 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 National Foods are associated (or correlated) with KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of National Foods i.e., National Foods and KSB Pumps go up and down completely randomly.
Pair Corralation between National Foods and KSB Pumps
Assuming the 90 days trading horizon National Foods is expected to generate 1.96 times less return on investment than KSB Pumps. But when comparing it to its historical volatility, National Foods is 1.77 times less risky than KSB Pumps. It trades about 0.16 of its potential returns per unit of risk. KSB Pumps is currently generating about 0.18 of returns per unit of risk over similar time horizon. 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 Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Foods vs. KSB Pumps
Performance |
| Timeline |
| National Foods |
| KSB Pumps |
National Foods and KSB Pumps Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Foods and KSB Pumps
The main advantage of trading using opposite National Foods and KSB Pumps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Foods position performs unexpectedly, KSB Pumps 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 KSB Pumps will offset losses from the drop in KSB Pumps' long position.| National Foods vs. Habib Insurance | National Foods vs. Shaheen Insurance | National Foods vs. Big Bird Foods | National Foods vs. Mughal Iron Steel |
| KSB Pumps vs. Masood Textile Mills | KSB Pumps vs. Fauji Foods | KSB Pumps vs. Mari Petroleum | KSB Pumps vs. Loads |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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