Correlation Between Kotak Mahindra and Shyam Metalics

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

Diversification Opportunities for Kotak Mahindra and Shyam Metalics

0.6

Correlation Coefficient

Kotak Mahindra  Shyam Metalics

Poor diversification

The 3 months correlation between Kotak and Shyam is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kotak Mahindra Bank and Shyam Metalics and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shyam Metalics 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 Shyam Metalics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shyam Metalics has no effect on the direction of Kotak Mahindra i.e., Kotak Mahindra and Shyam Metalics go up and down completely randomly.

Pair Corralation between Kotak Mahindra and Shyam Metalics

Assuming the 90 days trading horizon Kotak Mahindra Bank is expected to generate 0.58 times more return on investment than Shyam Metalics. However, Kotak Mahindra Bank is 1.71 times less risky than Shyam Metalics. It trades about -0.01 of its potential returns per unit of risk. Shyam Metalics and is currently generating about -0.23 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 (730.00) from holding Kotak Mahindra Bank or give up 0.41% 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.  Shyam Metalics and

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Shyam Metalics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shyam Metalics and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kotak Mahindra and Shyam Metalics

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

The idea behind Kotak Mahindra Bank and Shyam Metalics and 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.