Correlation Between Reliance Industries and Keynote Financial

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

Diversification Opportunities for Reliance Industries and Keynote Financial

0.73

Correlation Coefficient

Reliance Industries  Keynote Financial

Poor diversification

The 3 months correlation between Reliance and Keynote is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Keynote Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keynote Financial 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 Keynote Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keynote Financial has no effect on the direction of Reliance Industries i.e., Reliance Industries and Keynote Financial go up and down completely randomly.

Pair Corralation between Reliance Industries and Keynote Financial

Assuming the 90 days trading horizon Reliance Industries Limited is expected to generate 1.08 times more return on investment than Keynote Financial. However, Reliance Industries is 1.08 times more volatile than Keynote Financial Services. It trades about -0.06 of its potential returns per unit of risk. Keynote Financial Services is currently generating about -0.3 per unit of risk. If you would invest  127,820  in Reliance Industries Limited on October 12, 2024 and sell it today you would lose (2,345) from holding Reliance Industries Limited or give up 1.83% of portfolio value over 90 days.

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

Reliance Industries Limited  vs.  Keynote Financial Services

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 latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Keynote Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keynote Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Reliance Industries and Keynote Financial

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

The idea behind Reliance Industries Limited and Keynote Financial Services 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.