Correlation Between Power Finance and KCP Sugar

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

Diversification Opportunities for Power Finance and KCP Sugar

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Power and KCP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and KCP Sugar and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCP Sugar and Power Finance 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 Power Finance are associated (or correlated) with KCP Sugar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCP Sugar has no effect on the direction of Power Finance i.e., Power Finance and KCP Sugar go up and down completely randomly.

Pair Corralation between Power Finance and KCP Sugar

Assuming the 90 days trading horizon Power Finance is expected to generate 1.27 times more return on investment than KCP Sugar. However, Power Finance is 1.27 times more volatile than KCP Sugar and. It trades about 0.17 of its potential returns per unit of risk. KCP Sugar and is currently generating about 0.05 per unit of risk. If you would invest  45,574  in Power Finance on September 2, 2024 and sell it today you would earn a total of  3,956  from holding Power Finance or generate 8.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Power Finance  vs.  KCP Sugar and

 Performance 
       Timeline  
Power Finance 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Power Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
KCP Sugar 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KCP Sugar and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Power Finance and KCP Sugar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Power Finance and KCP Sugar

The main advantage of trading using opposite Power Finance and KCP Sugar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance position performs unexpectedly, KCP Sugar 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 KCP Sugar will offset losses from the drop in KCP Sugar's long position.
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The idea behind Power Finance and KCP Sugar and 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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