Correlation Between Kalyani Investment and Adani Power

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

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

Diversification Opportunities for Kalyani Investment and Adani Power

-0.2

Correlation Coefficient

Kalyani Investment  Adani Power

Good diversification

The 3 months correlation between Kalyani and Adani is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kalyani Investment and Adani Power Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adani Power Limited and Kalyani Investment 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 Kalyani Investment are associated (or correlated) with Adani Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adani Power Limited has no effect on the direction of Kalyani Investment i.e., Kalyani Investment and Adani Power go up and down completely randomly.

Pair Corralation between Kalyani Investment and Adani Power

Assuming the 90 days trading horizon Kalyani Investment is expected to generate 0.93 times more return on investment than Adani Power. However, Kalyani Investment is 1.07 times less risky than Adani Power. It trades about 0.01 of its potential returns per unit of risk. Adani Power Limited is currently generating about -0.09 per unit of risk. If you would invest  640,065  in Kalyani Investment on September 15, 2024 and sell it today you would lose (2,275) from holding Kalyani Investment or give up 0.36% of portfolio value over 90 days.

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

Kalyani Investment  vs.  Adani Power Limited

Kalyani Investment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kalyani Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Kalyani Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Adani Power Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adani Power Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Kalyani Investment and Adani Power

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

The idea behind Kalyani Investment and Adani Power 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.