Correlation Between KNR Constructions and IDBI Bank

Can any of the company-specific risk be diversified away by investing in both KNR Constructions and IDBI Bank 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 KNR Constructions and IDBI Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for KNR Constructions and IDBI Bank

0.33

Correlation Coefficient

KNR Constructions  IDBI Bank

Weak diversification

The 3 months correlation between KNR and IDBI is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding KNR Constructions Limited and IDBI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDBI Bank Limited and KNR Constructions 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 KNR Constructions Limited are associated (or correlated) with IDBI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDBI Bank Limited has no effect on the direction of KNR Constructions i.e., KNR Constructions and IDBI Bank go up and down completely randomly.

Pair Corralation between KNR Constructions and IDBI Bank

Assuming the 90 days trading horizon KNR Constructions is expected to generate 1.95 times less return on investment than IDBI Bank. But when comparing it to its historical volatility, KNR Constructions Limited is 1.18 times less risky than IDBI Bank. It trades about 0.03 of its potential returns per unit of risk. IDBI Bank Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,891  in IDBI Bank Limited on September 29, 2024 and sell it today you would earn a total of  2,758  from holding IDBI Bank Limited or generate 56.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.57%
Values	Daily Returns

KNR Constructions Limited  vs.  IDBI Bank Limited

KNR Constructions

Risk-Adjusted Performance

0 of 100

Very Weak

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

IDBI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDBI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with KNR Constructions and IDBI Bank

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

The idea behind KNR Constructions Limited and IDBI Bank 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 Global Correlations module to find global opportunities by holding instruments from different markets.