Correlation Between IDBI Bank and Karur Vysya

Can any of the company-specific risk be diversified away by investing in both IDBI Bank and Karur Vysya 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 IDBI Bank and Karur Vysya into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDBI Bank Limited and Karur Vysya Bank, you can compare the effects of market volatilities on IDBI Bank and Karur Vysya 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 IDBI Bank with a short position of Karur Vysya. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDBI Bank and Karur Vysya.

Diversification Opportunities for IDBI Bank and Karur Vysya

0.07

Correlation Coefficient

IDBI Bank  Karur Vysya

Significant diversification

The 3 months correlation between IDBI and Karur is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding IDBI Bank Limited and Karur Vysya Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karur Vysya Bank and IDBI Bank 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 IDBI Bank Limited are associated (or correlated) with Karur Vysya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karur Vysya Bank has no effect on the direction of IDBI Bank i.e., IDBI Bank and Karur Vysya go up and down completely randomly.

Pair Corralation between IDBI Bank and Karur Vysya

Assuming the 90 days trading horizon IDBI Bank is expected to generate 5.03 times less return on investment than Karur Vysya. But when comparing it to its historical volatility, IDBI Bank Limited is 1.01 times less risky than Karur Vysya. It trades about 0.03 of its potential returns per unit of risk. Karur Vysya Bank is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  22,293  in Karur Vysya Bank on September 5, 2024 and sell it today you would earn a total of  1,570  from holding Karur Vysya Bank or generate 7.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

IDBI Bank Limited  vs.  Karur Vysya Bank

IDBI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDBI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Karur Vysya Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Karur Vysya Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Karur Vysya may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IDBI Bank and Karur Vysya

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

The idea behind IDBI Bank Limited and Karur Vysya 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.