Correlation Between Khaitan Chemicals and IDBI Bank

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

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

Diversification Opportunities for Khaitan Chemicals and IDBI Bank

0.91

Correlation Coefficient

Khaitan Chemicals  IDBI Bank

Almost no diversification

The 3 months correlation between Khaitan and IDBI is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Khaitan Chemicals Fertilizers and IDBI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDBI Bank Limited and Khaitan Chemicals 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 Khaitan Chemicals Fertilizers are associated (or correlated) with IDBI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDBI Bank Limited has no effect on the direction of Khaitan Chemicals i.e., Khaitan Chemicals and IDBI Bank go up and down completely randomly.

Pair Corralation between Khaitan Chemicals and IDBI Bank

Assuming the 90 days trading horizon Khaitan Chemicals Fertilizers is expected to generate 1.39 times more return on investment than IDBI Bank. However, Khaitan Chemicals is 1.39 times more volatile than IDBI Bank Limited. It trades about 0.35 of its potential returns per unit of risk. IDBI Bank Limited is currently generating about 0.16 per unit of risk. If you would invest  5,714  in Khaitan Chemicals Fertilizers on April 25, 2025 and sell it today you would earn a total of  5,341  from holding Khaitan Chemicals Fertilizers or generate 93.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Khaitan Chemicals Fertilizers  vs.  IDBI Bank Limited

Khaitan Chemicals

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Khaitan Chemicals Fertilizers are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Khaitan Chemicals exhibited solid returns over the last few months and may actually be approaching a breakup point.

IDBI Bank Limited

Risk-Adjusted Performance

Good

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

Pair Trading with Khaitan Chemicals and IDBI Bank

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

The idea behind Khaitan Chemicals Fertilizers and IDBI Bank 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.