Correlation Between Kaynes Technology and Associated Alcohols

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

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

Diversification Opportunities for Kaynes Technology and Associated Alcohols

0.85

Correlation Coefficient

Kaynes Technology  Associated Alcohols

Very poor diversification

The 3 months correlation between Kaynes and Associated is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kaynes Technology India and Associated Alcohols Breweries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Alcohols and Kaynes Technology 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 Kaynes Technology India are associated (or correlated) with Associated Alcohols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Alcohols has no effect on the direction of Kaynes Technology i.e., Kaynes Technology and Associated Alcohols go up and down completely randomly.

Pair Corralation between Kaynes Technology and Associated Alcohols

Assuming the 90 days trading horizon Kaynes Technology India is expected to generate 0.81 times more return on investment than Associated Alcohols. However, Kaynes Technology India is 1.24 times less risky than Associated Alcohols. It trades about 0.55 of its potential returns per unit of risk. Associated Alcohols Breweries is currently generating about 0.4 per unit of risk. If you would invest  577,585  in Kaynes Technology India on September 21, 2024 and sell it today you would earn a total of  146,690  from holding Kaynes Technology India or generate 25.4% return on investment over 90 days.

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

Kaynes Technology India  vs.  Associated Alcohols Breweries

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.

Associated Alcohols

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Alcohols Breweries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Associated Alcohols reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaynes Technology and Associated Alcohols

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

The idea behind Kaynes Technology India and Associated Alcohols Breweries 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.