Correlation Between Kotak Mahindra and Orient Technologies

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

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

Diversification Opportunities for Kotak Mahindra and Orient Technologies

-0.6

Correlation Coefficient

Kotak Mahindra  Orient Technologies

Excellent diversification

The 3 months correlation between Kotak and Orient is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kotak Mahindra Bank and Orient Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Technologies and Kotak Mahindra 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 Kotak Mahindra Bank are associated (or correlated) with Orient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Technologies has no effect on the direction of Kotak Mahindra i.e., Kotak Mahindra and Orient Technologies go up and down completely randomly.

Pair Corralation between Kotak Mahindra and Orient Technologies

Assuming the 90 days trading horizon Kotak Mahindra Bank is expected to under-perform the Orient Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Kotak Mahindra Bank is 3.77 times less risky than Orient Technologies. The stock trades about -0.09 of its potential returns per unit of risk. The Orient Technologies Limited is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  27,124  in Orient Technologies Limited on October 1, 2024 and sell it today you would earn a total of  21,196  from holding Orient Technologies Limited or generate 78.14% return on investment over 90 days.

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

Kotak Mahindra Bank  vs.  Orient Technologies Limited

Kotak Mahindra Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kotak Mahindra Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Orient Technologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Orient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kotak Mahindra and Orient Technologies

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

The idea behind Kotak Mahindra Bank and Orient Technologies 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.