Implementation of Correlation Techniques for the Equity Market in India

Abstract: The equity market is the place where shares of listed companies can be managed by public and can be traded through exchanges. The shareholders can enjoy the financial benefits of the companies whose shares they hold. While the traditional theory tells that the factors that move stock prices are due to earnings per share, valuation multiple etc, technical factors like inflation, economic strength, substitutes etc. can also affect the rise and fall in stock market. This paper suggests three main parameters which is responsible for the up down trends in market and verifies the dependency of these three parameters by the means of correlation method in statistical analysis. Parameters like open interest, last traded price in derivatives and delivery volume in cash market are taken into account for the same. By the means of correlation function, the dependency of these three parameters with each other have been studied and observed to be correlated. Keywords: Financial Market, Derivatives, Earnings per Share, open interest, Last Traded Price, Exchange-Traded Funds.