Correlation Between Krebs Biochemicals and Kothari Petrochemicals

Can any of the company-specific risk be diversified away by investing in both Krebs Biochemicals and Kothari Petrochemicals 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 Krebs Biochemicals and Kothari Petrochemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Krebs Biochemicals and Kothari Petrochemicals

-0.3

Correlation Coefficient

Krebs Biochemicals  Kothari Petrochemicals

Very good diversification

The 3 months correlation between Krebs and Kothari is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Krebs Biochemicals and and Kothari Petrochemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kothari Petrochemicals and Krebs Biochemicals 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 Krebs Biochemicals and are associated (or correlated) with Kothari Petrochemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kothari Petrochemicals has no effect on the direction of Krebs Biochemicals i.e., Krebs Biochemicals and Kothari Petrochemicals go up and down completely randomly.

Pair Corralation between Krebs Biochemicals and Kothari Petrochemicals

Assuming the 90 days trading horizon Krebs Biochemicals and is expected to generate 3.52 times more return on investment than Kothari Petrochemicals. However, Krebs Biochemicals is 3.52 times more volatile than Kothari Petrochemicals Limited. It trades about 0.14 of its potential returns per unit of risk. Kothari Petrochemicals Limited is currently generating about 0.11 per unit of risk. If you would invest  8,310  in Krebs Biochemicals and on September 21, 2024 and sell it today you would earn a total of  1,595  from holding Krebs Biochemicals and or generate 19.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Krebs Biochemicals and  vs.  Kothari Petrochemicals Limited

Krebs Biochemicals and

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krebs Biochemicals and are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Krebs Biochemicals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Kothari Petrochemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kothari Petrochemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Krebs Biochemicals and Kothari Petrochemicals

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

The idea behind Krebs Biochemicals and and Kothari Petrochemicals 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.