Correlation Between DMCC SPECIALITY and Kotak Mahindra

Can any of the company-specific risk be diversified away by investing in both DMCC 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 DMCC 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 DMCC SPECIALITY CHEMICALS and Kotak Mahindra Bank, you can compare the effects of market volatilities on DMCC 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 DMCC SPECIALITY with a short position of Kotak Mahindra. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMCC SPECIALITY and Kotak Mahindra.

Diversification Opportunities for DMCC SPECIALITY and Kotak Mahindra

0.26

Correlation Coefficient

DMCC SPECIALITY  Kotak Mahindra

Modest diversification

The 3 months correlation between DMCC and Kotak is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding DMCC 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 DMCC 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 DMCC 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 DMCC SPECIALITY i.e., DMCC SPECIALITY and Kotak Mahindra go up and down completely randomly.

Pair Corralation between DMCC SPECIALITY and Kotak Mahindra

Assuming the 90 days trading horizon DMCC SPECIALITY CHEMICALS is expected to generate 2.44 times more return on investment than Kotak Mahindra. However, DMCC SPECIALITY is 2.44 times more volatile than Kotak Mahindra Bank. It trades about 0.16 of its potential returns per unit of risk. Kotak Mahindra Bank is currently generating about 0.09 per unit of risk. If you would invest  26,055  in DMCC SPECIALITY CHEMICALS on October 25, 2024 and sell it today you would earn a total of  10,795  from holding DMCC SPECIALITY CHEMICALS or generate 41.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

DMCC SPECIALITY CHEMICALS  vs.  Kotak Mahindra Bank

DMCC SPECIALITY CHEMICALS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DMCC SPECIALITY CHEMICALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, DMCC SPECIALITY unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kotak Mahindra Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kotak Mahindra Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kotak Mahindra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DMCC SPECIALITY and Kotak Mahindra

The main advantage of trading using opposite DMCC SPECIALITY and Kotak Mahindra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DMCC 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 DMCC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.