Correlation Between Chemcon Speciality and Kotak Mahindra

Can any of the company-specific risk be diversified away by investing in both Chemcon Speciality and Kotak Mahindra 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 Chemcon Speciality and Kotak Mahindra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chemcon Speciality Chemicals and Kotak Mahindra Bank, you can compare the effects of market volatilities on Chemcon Speciality and Kotak Mahindra 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 Chemcon Speciality with a short position of Kotak Mahindra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemcon Speciality and Kotak Mahindra.

Diversification Opportunities for Chemcon Speciality and Kotak Mahindra

-0.77

Correlation Coefficient

Chemcon Speciality  Kotak Mahindra

Pay attention - limited upside

The 3 months correlation between Chemcon and Kotak is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Chemcon Speciality Chemicals and Kotak Mahindra Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kotak Mahindra Bank and Chemcon Speciality 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 Chemcon Speciality Chemicals are associated (or correlated) with Kotak Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kotak Mahindra Bank has no effect on the direction of Chemcon Speciality i.e., Chemcon Speciality and Kotak Mahindra go up and down completely randomly.

Pair Corralation between Chemcon Speciality and Kotak Mahindra

Assuming the 90 days trading horizon Chemcon Speciality Chemicals is expected to under-perform the Kotak Mahindra. In addition to that, Chemcon Speciality is 1.27 times more volatile than Kotak Mahindra Bank. It trades about -0.18 of its total potential returns per unit of risk. Kotak Mahindra Bank is currently generating about 0.18 per unit of volatility. If you would invest  175,915  in Kotak Mahindra Bank on December 26, 2024 and sell it today you would earn a total of  38,575  from holding Kotak Mahindra Bank or generate 21.93% return on investment over 90 days.

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

Chemcon Speciality Chemicals  vs.  Kotak Mahindra Bank

Chemcon Speciality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chemcon Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kotak Mahindra Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kotak Mahindra Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kotak Mahindra sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chemcon Speciality and Kotak Mahindra

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

The idea behind Chemcon Speciality Chemicals and Kotak Mahindra Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .