Correlation Between Aarti Drugs and Kaynes Technology

Can any of the company-specific risk be diversified away by investing in both Aarti Drugs and Kaynes Technology 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 Aarti Drugs and Kaynes Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aarti Drugs Limited and Kaynes Technology India, you can compare the effects of market volatilities on Aarti Drugs and Kaynes Technology 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 Aarti Drugs with a short position of Kaynes Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aarti Drugs and Kaynes Technology.

Diversification Opportunities for Aarti Drugs and Kaynes Technology

-0.72

Correlation Coefficient

Aarti Drugs  Kaynes Technology

Pay attention - limited upside

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

Pair Corralation between Aarti Drugs and Kaynes Technology

Assuming the 90 days trading horizon Aarti Drugs Limited is expected to under-perform the Kaynes Technology. But the stock apears to be less risky and, when comparing its historical volatility, Aarti Drugs Limited is 2.75 times less risky than Kaynes Technology. The stock trades about -0.3 of its potential returns per unit of risk. The Kaynes Technology India is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  547,935  in Kaynes Technology India on September 20, 2024 and sell it today you would earn a total of  162,200  from holding Kaynes Technology India or generate 29.6% return on investment over 90 days.

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

Aarti Drugs Limited  vs.  Kaynes Technology India

Aarti Drugs Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aarti Drugs Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Kaynes Technology India

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kaynes Technology India are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kaynes Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aarti Drugs and Kaynes Technology

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

The idea behind Aarti Drugs Limited and Kaynes Technology India 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.