Correlation Between Repco Home and Kalyani Steels

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

Diversification Opportunities for Repco Home and Kalyani Steels

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Repco and Kalyani is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and Kalyani Steels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalyani Steels and Repco Home 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 Repco Home Finance are associated (or correlated) with Kalyani Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalyani Steels has no effect on the direction of Repco Home i.e., Repco Home and Kalyani Steels go up and down completely randomly.

Pair Corralation between Repco Home and Kalyani Steels

Assuming the 90 days trading horizon Repco Home Finance is expected to generate 0.84 times more return on investment than Kalyani Steels. However, Repco Home Finance is 1.2 times less risky than Kalyani Steels. It trades about -0.1 of its potential returns per unit of risk. Kalyani Steels Limited is currently generating about -0.36 per unit of risk. If you would invest  41,415  in Repco Home Finance on November 7, 2024 and sell it today you would lose (2,095) from holding Repco Home Finance or give up 5.06% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Repco Home Finance  vs.  Kalyani Steels Limited

 Performance 
       Timeline  
Repco Home Finance 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Repco Home Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
Kalyani Steels 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kalyani Steels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Kalyani Steels is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Repco Home and Kalyani Steels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Repco Home and Kalyani Steels

The main advantage of trading using opposite Repco Home and Kalyani Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repco Home position performs unexpectedly, Kalyani Steels 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 Kalyani Steels will offset losses from the drop in Kalyani Steels' long position.
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The idea behind Repco Home Finance and Kalyani Steels Limited 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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