Correlation Between KSB Pumps and IBL HealthCare

Can any of the company-specific risk be diversified away by investing in both KSB Pumps and IBL HealthCare 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 KSB Pumps and IBL HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KSB Pumps and IBL HealthCare, you can compare the effects of market volatilities on KSB Pumps and IBL HealthCare 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 KSB Pumps with a short position of IBL HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and IBL HealthCare.

Diversification Opportunities for KSB Pumps and IBL HealthCare

0.65

Correlation Coefficient

KSB Pumps  IBL HealthCare

Poor diversification

The 3 months correlation between KSB and IBL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps and IBL HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBL HealthCare and KSB Pumps 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 KSB Pumps are associated (or correlated) with IBL HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBL HealthCare has no effect on the direction of KSB Pumps i.e., KSB Pumps and IBL HealthCare go up and down completely randomly.

Pair Corralation between KSB Pumps and IBL HealthCare

Assuming the 90 days trading horizon KSB Pumps is expected to generate 1.35 times less return on investment than IBL HealthCare. In addition to that, KSB Pumps is 1.06 times more volatile than IBL HealthCare. It trades about 0.05 of its total potential returns per unit of risk. IBL HealthCare is currently generating about 0.07 per unit of volatility. If you would invest  3,261  in IBL HealthCare on August 30, 2024 and sell it today you would earn a total of  646.00  from holding IBL HealthCare or generate 19.81% return on investment over 90 days.

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

KSB Pumps  vs.  IBL HealthCare

KSB Pumps

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KSB Pumps are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KSB Pumps is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

IBL HealthCare

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IBL HealthCare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, IBL HealthCare disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KSB Pumps and IBL HealthCare

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

The idea behind KSB Pumps and IBL HealthCare 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.