Correlation Between Kaynes Technology and NMDC Steel

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

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

Diversification Opportunities for Kaynes Technology and NMDC Steel

-0.34

Correlation Coefficient

Kaynes Technology  NMDC Steel

Very good diversification

The 3 months correlation between Kaynes and NMDC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Kaynes Technology India and NMDC Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMDC Steel Limited and Kaynes Technology 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 Kaynes Technology India are associated (or correlated) with NMDC Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMDC Steel Limited has no effect on the direction of Kaynes Technology i.e., Kaynes Technology and NMDC Steel go up and down completely randomly.

Pair Corralation between Kaynes Technology and NMDC Steel

Assuming the 90 days trading horizon Kaynes Technology India is expected to generate 1.33 times more return on investment than NMDC Steel. However, Kaynes Technology is 1.33 times more volatile than NMDC Steel Limited. It trades about 0.15 of its potential returns per unit of risk. NMDC Steel Limited is currently generating about -0.1 per unit of risk. If you would invest  530,925  in Kaynes Technology India on September 15, 2024 and sell it today you would earn a total of  144,280  from holding Kaynes Technology India or generate 27.18% return on investment over 90 days.

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

Kaynes Technology India  vs.  NMDC Steel Limited

Kaynes Technology India

Risk-Adjusted Performance

12 of 100

Good

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.

NMDC Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMDC Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Kaynes Technology and NMDC Steel

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

The idea behind Kaynes Technology India and NMDC Steel Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.