Correlation Between Ravi Kumar and Kotak Mahindra

Can any of the company-specific risk be diversified away by investing in both Ravi Kumar and Kotak Mahindra 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 Ravi Kumar and Kotak Mahindra into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ravi Kumar Distilleries and Kotak Mahindra Bank, you can compare the effects of market volatilities on Ravi Kumar and Kotak Mahindra 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 Ravi Kumar with a short position of Kotak Mahindra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ravi Kumar and Kotak Mahindra.

Diversification Opportunities for Ravi Kumar and Kotak Mahindra

-0.7

Correlation Coefficient

Ravi Kumar  Kotak Mahindra

Excellent diversification

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

Pair Corralation between Ravi Kumar and Kotak Mahindra

Assuming the 90 days trading horizon Ravi Kumar Distilleries is expected to under-perform the Kotak Mahindra. In addition to that, Ravi Kumar is 1.69 times more volatile than Kotak Mahindra Bank. It trades about -0.05 of its total potential returns per unit of risk. Kotak Mahindra Bank is currently generating about 0.17 per unit of volatility. If you would invest  175,000  in Kotak Mahindra Bank on December 24, 2024 and sell it today you would earn a total of  32,900  from holding Kotak Mahindra Bank or generate 18.8% return on investment over 90 days.

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

Ravi Kumar Distilleries  vs.  Kotak Mahindra Bank

Ravi Kumar Distilleries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ravi Kumar Distilleries 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Kotak Mahindra Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kotak Mahindra Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Kotak Mahindra sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ravi Kumar and Kotak Mahindra

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

The idea behind Ravi Kumar Distilleries and Kotak Mahindra Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.