Correlation Between Coffee Day and Refex Industries

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

Diversification Opportunities for Coffee Day and Refex Industries

-0.23

Correlation Coefficient

Coffee Day  Refex Industries

Very good diversification

The 3 months correlation between Coffee and Refex is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries 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 Refex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Refex Industries has no effect on the direction of Coffee Day i.e., Coffee Day and Refex Industries go up and down completely randomly.

Pair Corralation between Coffee Day and Refex Industries

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to generate 1.71 times more return on investment than Refex Industries. However, Coffee Day is 1.71 times more volatile than Refex Industries Limited. It trades about 0.2 of its potential returns per unit of risk. Refex Industries Limited is currently generating about -0.19 per unit of risk. If you would invest  2,641  in Coffee Day Enterprises on October 11, 2024 and sell it today you would earn a total of  387.00  from holding Coffee Day Enterprises or generate 14.65% return on investment over 90 days.

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

Coffee Day Enterprises  vs.  Refex Industries Limited

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 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.

Refex Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Refex Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Coffee Day and Refex Industries

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

The idea behind Coffee Day Enterprises and Refex Industries 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.

Check out your portfolio center.

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.