Correlation Between ZF Commercial and KNR Constructions

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

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

Diversification Opportunities for ZF Commercial and KNR Constructions

-0.13

Correlation Coefficient

ZF Commercial  KNR Constructions

Good diversification

The 3 months correlation between ZFCVINDIA and KNR is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding ZF Commercial Vehicle and KNR Constructions Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNR Constructions and ZF Commercial 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 ZF Commercial Vehicle are associated (or correlated) with KNR Constructions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNR Constructions has no effect on the direction of ZF Commercial i.e., ZF Commercial and KNR Constructions go up and down completely randomly.

Pair Corralation between ZF Commercial and KNR Constructions

Assuming the 90 days trading horizon ZF Commercial Vehicle is expected to under-perform the KNR Constructions. In addition to that, ZF Commercial is 1.02 times more volatile than KNR Constructions Limited. It trades about -0.21 of its total potential returns per unit of risk. KNR Constructions Limited is currently generating about 0.06 per unit of volatility. If you would invest  31,605  in KNR Constructions Limited on September 20, 2024 and sell it today you would earn a total of  2,340  from holding KNR Constructions Limited or generate 7.4% return on investment over 90 days.

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

ZF Commercial Vehicle  vs.  KNR Constructions Limited

ZF Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZF Commercial Vehicle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KNR Constructions

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KNR Constructions Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, KNR Constructions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ZF Commercial and KNR Constructions

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

The idea behind ZF Commercial Vehicle and KNR Constructions 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.