Correlation Between Keynote Financial and Tata Chemicals

Can any of the company-specific risk be diversified away by investing in both Keynote Financial and Tata Chemicals 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 Keynote Financial and Tata Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keynote Financial Services and Tata Chemicals Limited, you can compare the effects of market volatilities on Keynote Financial and Tata Chemicals 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 Keynote Financial with a short position of Tata Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keynote Financial and Tata Chemicals.

Diversification Opportunities for Keynote Financial and Tata Chemicals

0.41

Correlation Coefficient

Keynote Financial  Tata Chemicals

Very weak diversification

The 3 months correlation between Keynote and Tata is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Keynote Financial Services and Tata Chemicals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Chemicals and Keynote Financial 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 Keynote Financial Services are associated (or correlated) with Tata Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Chemicals has no effect on the direction of Keynote Financial i.e., Keynote Financial and Tata Chemicals go up and down completely randomly.

Pair Corralation between Keynote Financial and Tata Chemicals

Assuming the 90 days trading horizon Keynote Financial Services is expected to under-perform the Tata Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Keynote Financial Services is 1.19 times less risky than Tata Chemicals. The stock trades about -0.4 of its potential returns per unit of risk. The Tata Chemicals Limited is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  110,605  in Tata Chemicals Limited on October 8, 2024 and sell it today you would lose (7,815) from holding Tata Chemicals Limited or give up 7.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Keynote Financial Services  vs.  Tata Chemicals Limited

Keynote Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keynote Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Tata Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Tata Chemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Keynote Financial and Tata Chemicals

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

The idea behind Keynote Financial Services and Tata Chemicals 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.