Correlation Between Coal India and Vertoz Advertising

Can any of the company-specific risk be diversified away by investing in both Coal India and Vertoz Advertising 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 Vertoz Advertising 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 Vertoz Advertising Limited, you can compare the effects of market volatilities on Coal India and Vertoz Advertising 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 Vertoz Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coal India and Vertoz Advertising.

Diversification Opportunities for Coal India and Vertoz Advertising

0.76

Correlation Coefficient

Coal India  Vertoz Advertising

Poor diversification

The 3 months correlation between Coal and Vertoz is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Coal India Limited and Vertoz Advertising Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertoz Advertising 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 Vertoz Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertoz Advertising has no effect on the direction of Coal India i.e., Coal India and Vertoz Advertising go up and down completely randomly.

Pair Corralation between Coal India and Vertoz Advertising

Assuming the 90 days trading horizon Coal India Limited is expected to generate 0.51 times more return on investment than Vertoz Advertising. However, Coal India Limited is 1.96 times less risky than Vertoz Advertising. It trades about -0.28 of its potential returns per unit of risk. Vertoz Advertising Limited is currently generating about -0.32 per unit of risk. If you would invest  41,400  in Coal India Limited on October 10, 2024 and sell it today you would lose (3,420) from holding Coal India Limited or give up 8.26% of portfolio value over 90 days.

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

Coal India Limited  vs.  Vertoz Advertising 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 uncertain 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.

Vertoz Advertising

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertoz Advertising Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Coal India and Vertoz Advertising

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

The idea behind Coal India Limited and Vertoz Advertising 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.