Correlation Between Coal India and Orient Technologies

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

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

Diversification Opportunities for Coal India and Orient Technologies

-0.91

Correlation Coefficient

Coal India  Orient Technologies

Pay attention - limited upside

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

Pair Corralation between Coal India and Orient Technologies

Assuming the 90 days trading horizon Coal India Limited is expected to under-perform the Orient Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Coal India Limited is 3.29 times less risky than Orient Technologies. The stock trades about -0.34 of its potential returns per unit of risk. The Orient Technologies Limited is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  41,610  in Orient Technologies Limited on October 13, 2024 and sell it today you would earn a total of  18,165  from holding Orient Technologies Limited or generate 43.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Coal India Limited  vs.  Orient Technologies Limited

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 unsteady 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.

Orient Technologies

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Orient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coal India and Orient Technologies

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

The idea behind Coal India Limited and Orient Technologies 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.