Correlation Between AUTHUM INVESTMENT and Coal India

Can any of the company-specific risk be diversified away by investing in both AUTHUM INVESTMENT and Coal India 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 AUTHUM INVESTMENT and Coal India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUTHUM INVESTMENT INFRASTRUCTU and Coal India Limited, you can compare the effects of market volatilities on AUTHUM INVESTMENT and Coal India 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 AUTHUM INVESTMENT with a short position of Coal India. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTHUM INVESTMENT and Coal India.

Diversification Opportunities for AUTHUM INVESTMENT and Coal India

0.41

Correlation Coefficient

AUTHUM INVESTMENT  Coal India

Very weak diversification

The 3 months correlation between AUTHUM and Coal is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AUTHUM INVESTMENT INFRASTRUCTU and Coal India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coal India Limited and AUTHUM 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 AUTHUM INVESTMENT INFRASTRUCTU are associated (or correlated) with Coal India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coal India Limited has no effect on the direction of AUTHUM INVESTMENT i.e., AUTHUM INVESTMENT and Coal India go up and down completely randomly.

Pair Corralation between AUTHUM INVESTMENT and Coal India

Assuming the 90 days trading horizon AUTHUM INVESTMENT INFRASTRUCTU is expected to generate 1.91 times more return on investment than Coal India. However, AUTHUM INVESTMENT is 1.91 times more volatile than Coal India Limited. It trades about 0.12 of its potential returns per unit of risk. Coal India Limited is currently generating about -0.09 per unit of risk. If you would invest  112,795  in AUTHUM INVESTMENT INFRASTRUCTU on October 3, 2024 and sell it today you would earn a total of  57,675  from holding AUTHUM INVESTMENT INFRASTRUCTU or generate 51.13% return on investment over 90 days.

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

AUTHUM INVESTMENT INFRASTRUCTU  vs.  Coal India Limited

AUTHUM INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTHUM INVESTMENT INFRASTRUCTU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUTHUM INVESTMENT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Coal India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coal India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AUTHUM INVESTMENT and Coal India

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

The idea behind AUTHUM INVESTMENT INFRASTRUCTU and Coal India 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.