Correlation Between Kotak Mahindra and India Glycols

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

Diversification Opportunities for Kotak Mahindra and India Glycols

0.64

Correlation Coefficient

Kotak Mahindra  India Glycols

Poor diversification

The 3 months correlation between Kotak and India is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kotak Mahindra Bank and India Glycols Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on India Glycols Limited 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 India Glycols. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of India Glycols Limited has no effect on the direction of Kotak Mahindra i.e., Kotak Mahindra and India Glycols go up and down completely randomly.

Pair Corralation between Kotak Mahindra and India Glycols

Assuming the 90 days trading horizon Kotak Mahindra Bank is expected to generate 0.49 times more return on investment than India Glycols. However, Kotak Mahindra Bank is 2.06 times less risky than India Glycols. It trades about -0.03 of its potential returns per unit of risk. India Glycols Limited is currently generating about -0.12 per unit of risk. If you would invest  178,695  in Kotak Mahindra Bank on October 9, 2024 and sell it today you would lose (1,490) from holding Kotak Mahindra Bank or give up 0.83% of portfolio value over 90 days.

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

Kotak Mahindra Bank  vs.  India Glycols Limited

Kotak Mahindra Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kotak Mahindra Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kotak Mahindra is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

India Glycols Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days India Glycols Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Kotak Mahindra and India Glycols

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

The idea behind Kotak Mahindra Bank and India Glycols 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.