Correlation Between Thermax and Kaynes Technology

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

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

Diversification Opportunities for Thermax and Kaynes Technology

-0.39

Correlation Coefficient

Thermax  Kaynes Technology

Very good diversification

The 3 months correlation between Thermax and Kaynes is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Thermax 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 Thermax 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 Thermax 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 Thermax i.e., Thermax and Kaynes Technology go up and down completely randomly.

Pair Corralation between Thermax and Kaynes Technology

Assuming the 90 days trading horizon Thermax Limited is expected to under-perform the Kaynes Technology. But the stock apears to be less risky and, when comparing its historical volatility, Thermax Limited is 1.24 times less risky than Kaynes Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Kaynes Technology India is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  555,925  in Kaynes Technology India on September 17, 2024 and sell it today you would earn a total of  156,050  from holding Kaynes Technology India or generate 28.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Thermax Limited  vs.  Kaynes Technology India

Thermax Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thermax Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Thermax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Kaynes Technology India

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaynes Technology India are ranked lower than 12 (%) 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 Thermax and Kaynes Technology

The main advantage of trading using opposite Thermax and Kaynes Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thermax 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 Thermax 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 Stocks Directory module to find actively traded stocks across global markets.