Correlation Between Kotak Mahindra and Hindustan Zinc

Can any of the company-specific risk be diversified away by investing in both Kotak Mahindra and Hindustan Zinc 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 Kotak Mahindra and Hindustan Zinc into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Kotak Mahindra and Hindustan Zinc

0.0

Correlation Coefficient

Kotak Mahindra  Hindustan Zinc

Pay attention - limited upside

The 3 months correlation between Kotak and Hindustan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Kotak Mahindra Bank and Hindustan Zinc Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Zinc and Kotak Mahindra 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 Kotak Mahindra Bank are associated (or correlated) with Hindustan Zinc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Zinc has no effect on the direction of Kotak Mahindra i.e., Kotak Mahindra and Hindustan Zinc go up and down completely randomly.

Pair Corralation between Kotak Mahindra and Hindustan Zinc

If you would invest  174,120  in Kotak Mahindra Bank on December 30, 2024 and sell it today you would earn a total of  43,000  from holding Kotak Mahindra Bank or generate 24.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Kotak Mahindra Bank  vs.  Hindustan Zinc Limited

Kotak Mahindra Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kotak Mahindra Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Kotak Mahindra sustained solid returns over the last few months and may actually be approaching a breakup point.

Hindustan Zinc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hindustan Zinc Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Hindustan Zinc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kotak Mahindra and Hindustan Zinc

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

The idea behind Kotak Mahindra Bank and Hindustan Zinc 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.