Correlation Between Bosch and Coffee Day

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

By analyzing existing cross correlation between Bosch Limited and Coffee Day Enterprises, you can compare the effects of market volatilities on Bosch and Coffee Day 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 Bosch with a short position of Coffee Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bosch and Coffee Day.

Diversification Opportunities for Bosch and Coffee Day

0.59

Correlation Coefficient

Bosch  Coffee Day

Very weak diversification

The 3 months correlation between Bosch and Coffee is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bosch Limited and Coffee Day Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Day Enterprises and Bosch 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 Bosch Limited are associated (or correlated) with Coffee Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Day Enterprises has no effect on the direction of Bosch i.e., Bosch and Coffee Day go up and down completely randomly.

Pair Corralation between Bosch and Coffee Day

Assuming the 90 days trading horizon Bosch Limited is expected to under-perform the Coffee Day. But the stock apears to be less risky and, when comparing its historical volatility, Bosch Limited is 3.8 times less risky than Coffee Day. The stock trades about -0.26 of its potential returns per unit of risk. The Coffee Day Enterprises is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,641  in Coffee Day Enterprises on October 8, 2024 and sell it today you would lose (24.00) from holding Coffee Day Enterprises or give up 0.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Bosch Limited  vs.  Coffee Day Enterprises

Bosch Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bosch Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Coffee Day Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coffee Day Enterprises 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 Bosch and Coffee Day

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

The idea behind Bosch Limited and Coffee Day Enterprises 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.