Correlation Between State Bank and Kotak Mahindra

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

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

Diversification Opportunities for State Bank and Kotak Mahindra

-0.38

Correlation Coefficient

State Bank  Kotak Mahindra

Very good diversification

The 3 months correlation between State and Kotak is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Kotak Mahindra Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kotak Mahindra Bank and State Bank 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 State Bank of are associated (or correlated) with Kotak Mahindra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kotak Mahindra Bank has no effect on the direction of State Bank i.e., State Bank and Kotak Mahindra go up and down completely randomly.

Pair Corralation between State Bank and Kotak Mahindra

Assuming the 90 days trading horizon State Bank of is expected to generate 1.27 times more return on investment than Kotak Mahindra. However, State Bank is 1.27 times more volatile than Kotak Mahindra Bank. It trades about 0.07 of its potential returns per unit of risk. Kotak Mahindra Bank is currently generating about -0.06 per unit of risk. If you would invest  78,995  in State Bank of on September 19, 2024 and sell it today you would earn a total of  4,820  from holding State Bank of or generate 6.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

State Bank of  vs.  Kotak Mahindra Bank

State Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 somewhat strong basic indicators, Kotak Mahindra is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with State Bank and Kotak Mahindra

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

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