Correlation Between Power Finance and Kaynes Technology

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

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

Diversification Opportunities for Power Finance and Kaynes Technology

0.18

Correlation Coefficient

Power Finance  Kaynes Technology

Average diversification

The 3 months correlation between Power and Kaynes is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance 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 Power Finance 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 Power Finance 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 Power Finance i.e., Power Finance and Kaynes Technology go up and down completely randomly.

Pair Corralation between Power Finance and Kaynes Technology

Assuming the 90 days trading horizon Power Finance is expected to generate 5.56 times less return on investment than Kaynes Technology. But when comparing it to its historical volatility, Power Finance is 1.08 times less risky than Kaynes Technology. It trades about 0.06 of its potential returns per unit of risk. Kaynes Technology India is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  487,080  in Kaynes Technology India on October 6, 2024 and sell it today you would earn a total of  267,390  from holding Kaynes Technology India or generate 54.9% return on investment over 90 days.

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

Power Finance  vs.  Kaynes Technology India

Power Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Power Finance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kaynes Technology India

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kaynes Technology India are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kaynes Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Finance and Kaynes Technology

The main advantage of trading using opposite Power Finance and Kaynes Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance 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 Power Finance 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.