Correlation Between Oil India and Kaynes Technology

Can any of the company-specific risk be diversified away by investing in both Oil India and Kaynes Technology 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 Oil India and Kaynes Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oil India Limited and Kaynes Technology India, you can compare the effects of market volatilities on Oil India and Kaynes Technology 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 Oil India with a short position of Kaynes Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil India and Kaynes Technology.

Diversification Opportunities for Oil India and Kaynes Technology

-0.7

Correlation Coefficient

Oil India  Kaynes Technology

Excellent diversification

The 3 months correlation between Oil and Kaynes is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Oil India Limited and Kaynes Technology India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaynes Technology India and Oil India 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 Oil India Limited are associated (or correlated) with Kaynes Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaynes Technology India has no effect on the direction of Oil India i.e., Oil India and Kaynes Technology go up and down completely randomly.

Pair Corralation between Oil India and Kaynes Technology

Assuming the 90 days trading horizon Oil India Limited is expected to generate 2.36 times more return on investment than Kaynes Technology. However, Oil India is 2.36 times more volatile than Kaynes Technology India. It trades about 0.07 of its potential returns per unit of risk. Kaynes Technology India is currently generating about 0.14 per unit of risk. If you would invest  25,778  in Oil India Limited on October 9, 2024 and sell it today you would earn a total of  21,657  from holding Oil India Limited or generate 84.01% return on investment over 90 days.

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

Oil India Limited  vs.  Kaynes Technology India

Oil India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting 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.

Kaynes Technology India

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Oil India and Kaynes Technology

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

The idea behind Oil India Limited and Kaynes Technology India 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.