Correlation Between Kotak Mahindra and Silgo Retail

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

Diversification Opportunities for Kotak Mahindra and Silgo Retail

0.53

Correlation Coefficient

Kotak Mahindra  Silgo Retail

Very weak diversification

The 3 months correlation between Kotak and Silgo is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kotak Mahindra Bank and Silgo Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgo Retail 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 Silgo Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgo Retail Limited has no effect on the direction of Kotak Mahindra i.e., Kotak Mahindra and Silgo Retail go up and down completely randomly.

Pair Corralation between Kotak Mahindra and Silgo Retail

Assuming the 90 days trading horizon Kotak Mahindra is expected to generate 2.13 times less return on investment than Silgo Retail. But when comparing it to its historical volatility, Kotak Mahindra Bank is 3.51 times less risky than Silgo Retail. It trades about 0.21 of its potential returns per unit of risk. Silgo Retail Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,770  in Silgo Retail Limited on September 19, 2024 and sell it today you would earn a total of  297.00  from holding Silgo Retail Limited or generate 7.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Kotak Mahindra Bank  vs.  Silgo Retail 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Silgo Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kotak Mahindra and Silgo Retail

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

The idea behind Kotak Mahindra Bank and Silgo Retail 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.