Correlation Between Coffee Day and Agarwal Industrial

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

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

Diversification Opportunities for Coffee Day and Agarwal Industrial

-0.49

Correlation Coefficient

Coffee Day  Agarwal Industrial

Very good diversification

The 3 months correlation between Coffee and Agarwal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Agarwal Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agarwal Industrial and Coffee Day 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 Coffee Day Enterprises are associated (or correlated) with Agarwal Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agarwal Industrial has no effect on the direction of Coffee Day i.e., Coffee Day and Agarwal Industrial go up and down completely randomly.

Pair Corralation between Coffee Day and Agarwal Industrial

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to under-perform the Agarwal Industrial. In addition to that, Coffee Day is 1.26 times more volatile than Agarwal Industrial. It trades about -0.02 of its total potential returns per unit of risk. Agarwal Industrial is currently generating about 0.07 per unit of volatility. If you would invest  59,212  in Agarwal Industrial on September 26, 2024 and sell it today you would earn a total of  70,433  from holding Agarwal Industrial or generate 118.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Coffee Day Enterprises  vs.  Agarwal Industrial

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Agarwal Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agarwal Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, Agarwal Industrial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coffee Day and Agarwal Industrial

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

The idea behind Coffee Day Enterprises and Agarwal Industrial 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.