Correlation Between Kaynes Technology and Diamond Power

Can any of the company-specific risk be diversified away by investing in both Kaynes Technology and Diamond Power 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 Diamond Power 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 Diamond Power Infrastructure, you can compare the effects of market volatilities on Kaynes Technology and Diamond Power 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 Diamond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaynes Technology and Diamond Power.

Diversification Opportunities for Kaynes Technology and Diamond Power

0.03

Correlation Coefficient

Kaynes Technology  Diamond Power

Significant diversification

The 3 months correlation between Kaynes and Diamond is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kaynes Technology India and Diamond Power Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Power Infras 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 Diamond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Power Infras has no effect on the direction of Kaynes Technology i.e., Kaynes Technology and Diamond Power go up and down completely randomly.

Pair Corralation between Kaynes Technology and Diamond Power

Assuming the 90 days trading horizon Kaynes Technology is expected to generate 32.49 times less return on investment than Diamond Power. But when comparing it to its historical volatility, Kaynes Technology India is 46.66 times less risky than Diamond Power. It trades about 0.17 of its potential returns per unit of risk. Diamond Power Infrastructure is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,668  in Diamond Power Infrastructure on September 18, 2024 and sell it today you would earn a total of  2,737  from holding Diamond Power Infrastructure or generate 20.02% return on investment over 90 days.

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

Kaynes Technology India  vs.  Diamond Power Infrastructure

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.

Diamond Power Infras

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Power Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diamond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaynes Technology and Diamond Power

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

The idea behind Kaynes Technology India and Diamond Power Infrastructure 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.