Correlation Between KEI Industries and Bharti Airtel

Can any of the company-specific risk be diversified away by investing in both KEI Industries and Bharti Airtel 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 KEI Industries and Bharti Airtel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KEI Industries Limited and Bharti Airtel Limited, you can compare the effects of market volatilities on KEI Industries and Bharti Airtel 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 KEI Industries with a short position of Bharti Airtel. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEI Industries and Bharti Airtel.

Diversification Opportunities for KEI Industries and Bharti Airtel

0.35

Correlation Coefficient

KEI Industries  Bharti Airtel

Weak diversification

The 3 months correlation between KEI and Bharti is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding KEI Industries Limited and Bharti Airtel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bharti Airtel Limited and KEI Industries 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 KEI Industries Limited are associated (or correlated) with Bharti Airtel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bharti Airtel Limited has no effect on the direction of KEI Industries i.e., KEI Industries and Bharti Airtel go up and down completely randomly.

Pair Corralation between KEI Industries and Bharti Airtel

Assuming the 90 days trading horizon KEI Industries Limited is expected to generate 1.71 times more return on investment than Bharti Airtel. However, KEI Industries is 1.71 times more volatile than Bharti Airtel Limited. It trades about 0.0 of its potential returns per unit of risk. Bharti Airtel Limited is currently generating about -0.11 per unit of risk. If you would invest  421,085  in KEI Industries Limited on September 23, 2024 and sell it today you would lose (4,460) from holding KEI Industries Limited or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

KEI Industries Limited  vs.  Bharti Airtel Limited

KEI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bharti Airtel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bharti Airtel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KEI Industries and Bharti Airtel

The main advantage of trading using opposite KEI Industries and Bharti Airtel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEI Industries position performs unexpectedly, Bharti Airtel 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 Bharti Airtel will offset losses from the drop in Bharti Airtel's long position.

The idea behind KEI Industries Limited and Bharti Airtel 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.