Correlation Between Coffee Day and Silgo Retail

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

Diversification Opportunities for Coffee Day and Silgo Retail

0.43

Correlation Coefficient

Coffee Day  Silgo Retail

Very weak diversification

The 3 months correlation between Coffee and Silgo is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Silgo Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silgo Retail Limited 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 Silgo Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silgo Retail Limited has no effect on the direction of Coffee Day i.e., Coffee Day and Silgo Retail go up and down completely randomly.

Pair Corralation between Coffee Day and Silgo Retail

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to generate 1.06 times more return on investment than Silgo Retail. However, Coffee Day is 1.06 times more volatile than Silgo Retail Limited. It trades about -0.03 of its potential returns per unit of risk. Silgo Retail Limited is currently generating about -0.16 per unit of risk. If you would invest  2,965  in Coffee Day Enterprises on October 26, 2024 and sell it today you would lose (233.00) from holding Coffee Day Enterprises or give up 7.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Coffee Day Enterprises  vs.  Silgo Retail 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 rather sound fundamental indicators, Coffee Day is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Silgo Retail Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silgo Retail Limited 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 essential indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Coffee Day and Silgo Retail

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

The idea behind Coffee Day Enterprises and Silgo Retail 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.