Correlation Between Reliance Industries and Kaynes Technology

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

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

Diversification Opportunities for Reliance Industries and Kaynes Technology

-0.55

Correlation Coefficient

Reliance Industries  Kaynes Technology

Excellent diversification

The 3 months correlation between Reliance and Kaynes is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries 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 Reliance Industries 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 Reliance Industries 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 Reliance Industries i.e., Reliance Industries and Kaynes Technology go up and down completely randomly.

Pair Corralation between Reliance Industries and Kaynes Technology

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 4.14 times more return on investment than Kaynes Technology. However, Reliance Industries is 4.14 times more volatile than Kaynes Technology India. It trades about 0.05 of its potential returns per unit of risk. Kaynes Technology India is currently generating about 0.17 per unit of risk. If you would invest  113,065  in Reliance Industries Limited on September 25, 2024 and sell it today you would earn a total of  9,165  from holding Reliance Industries Limited or generate 8.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Reliance Industries Limited  vs.  Kaynes Technology India

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries 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 basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kaynes Technology India

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kaynes Technology India are ranked lower than 13 (%) 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 Reliance Industries and Kaynes Technology

The main advantage of trading using opposite Reliance Industries and Kaynes Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.