Correlation Between Kaynes Technology and Thermax

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

Diversification Opportunities for Kaynes Technology and Thermax

-0.58

Correlation Coefficient

Kaynes Technology  Thermax

Excellent diversification

The 3 months correlation between Kaynes and Thermax is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kaynes Technology India and Thermax Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermax Limited 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 Thermax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermax Limited has no effect on the direction of Kaynes Technology i.e., Kaynes Technology and Thermax go up and down completely randomly.

Pair Corralation between Kaynes Technology and Thermax

Assuming the 90 days trading horizon Kaynes Technology India is expected to generate 1.14 times more return on investment than Thermax. However, Kaynes Technology is 1.14 times more volatile than Thermax Limited. It trades about 0.1 of its potential returns per unit of risk. Thermax Limited is currently generating about -0.04 per unit of risk. If you would invest  515,440  in Kaynes Technology India on October 20, 2024 and sell it today you would earn a total of  142,550  from holding Kaynes Technology India or generate 27.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.1%
Values	Daily Returns

Kaynes Technology India  vs.  Thermax Limited

Kaynes Technology India

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaynes Technology India are ranked lower than 7 (%) 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.

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kaynes Technology and Thermax

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

The idea behind Kaynes Technology India and Thermax Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.