Correlation Between Kaynes Technology and Persistent Systems

Can any of the company-specific risk be diversified away by investing in both Kaynes Technology and Persistent Systems 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 Persistent Systems 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 Persistent Systems Limited, you can compare the effects of market volatilities on Kaynes Technology and Persistent Systems 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 Persistent Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaynes Technology and Persistent Systems.

Diversification Opportunities for Kaynes Technology and Persistent Systems

0.84

Correlation Coefficient

Kaynes Technology  Persistent Systems

Very poor diversification

The 3 months correlation between Kaynes and Persistent is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kaynes Technology India and Persistent Systems Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persistent Systems 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 Persistent Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Persistent Systems has no effect on the direction of Kaynes Technology i.e., Kaynes Technology and Persistent Systems go up and down completely randomly.

Pair Corralation between Kaynes Technology and Persistent Systems

Assuming the 90 days trading horizon Kaynes Technology India is expected to generate 1.21 times more return on investment than Persistent Systems. However, Kaynes Technology is 1.21 times more volatile than Persistent Systems Limited. It trades about 0.14 of its potential returns per unit of risk. Persistent Systems Limited is currently generating about 0.15 per unit of risk. If you would invest  530,925  in Kaynes Technology India on September 14, 2024 and sell it today you would earn a total of  128,790  from holding Kaynes Technology India or generate 24.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Kaynes Technology India  vs.  Persistent Systems Limited

Kaynes Technology India

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaynes Technology India are ranked lower than 11 (%) 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.

Persistent Systems

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Persistent Systems Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Persistent Systems unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaynes Technology and Persistent Systems

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

The idea behind Kaynes Technology India and Persistent Systems 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.

Check out your portfolio center.

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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.