Correlation Between Kanoria Chemicals and Vardhman Holdings

Can any of the company-specific risk be diversified away by investing in both Kanoria Chemicals and Vardhman Holdings 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 Kanoria Chemicals and Vardhman Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kanoria Chemicals and Vardhman Holdings

0.72

Correlation Coefficient

Kanoria Chemicals  Vardhman Holdings

Poor diversification

The 3 months correlation between Kanoria and Vardhman is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kanoria Chemicals Industries and Vardhman Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vardhman Holdings and Kanoria Chemicals 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 Kanoria Chemicals Industries are associated (or correlated) with Vardhman Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vardhman Holdings has no effect on the direction of Kanoria Chemicals i.e., Kanoria Chemicals and Vardhman Holdings go up and down completely randomly.

Pair Corralation between Kanoria Chemicals and Vardhman Holdings

Assuming the 90 days trading horizon Kanoria Chemicals is expected to generate 6.59 times less return on investment than Vardhman Holdings. In addition to that, Kanoria Chemicals is 1.18 times more volatile than Vardhman Holdings Limited. It trades about 0.02 of its total potential returns per unit of risk. Vardhman Holdings Limited is currently generating about 0.13 per unit of volatility. If you would invest  360,850  in Vardhman Holdings Limited on April 25, 2025 and sell it today you would earn a total of  47,040  from holding Vardhman Holdings Limited or generate 13.04% return on investment over 90 days.

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

Kanoria Chemicals Industries  vs.  Vardhman Holdings Limited

Kanoria Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kanoria Chemicals Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Kanoria Chemicals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vardhman Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vardhman Holdings Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Vardhman Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kanoria Chemicals and Vardhman Holdings

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

The idea behind Kanoria Chemicals Industries and Vardhman Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.