Correlation Between Coffee Day and TATA SUMER

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

Diversification Opportunities for Coffee Day and TATA SUMER

0.79

Correlation Coefficient

Coffee Day  TATA SUMER

Poor diversification

The 3 months correlation between Coffee and TATA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and TATA SUMER PRODUCTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TATA SUMER PRODUCTS 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 TATA SUMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TATA SUMER PRODUCTS has no effect on the direction of Coffee Day i.e., Coffee Day and TATA SUMER go up and down completely randomly.

Pair Corralation between Coffee Day and TATA SUMER

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to generate 4.21 times more return on investment than TATA SUMER. However, Coffee Day is 4.21 times more volatile than TATA SUMER PRODUCTS. It trades about 0.21 of its potential returns per unit of risk. TATA SUMER PRODUCTS is currently generating about 0.34 per unit of risk. If you would invest  2,382  in Coffee Day Enterprises on October 23, 2024 and sell it today you would earn a total of  350.00  from holding Coffee Day Enterprises or generate 14.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Coffee Day Enterprises  vs.  TATA SUMER PRODUCTS

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 latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

TATA SUMER PRODUCTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TATA SUMER PRODUCTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TATA SUMER 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 TATA SUMER

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

The idea behind Coffee Day Enterprises and TATA SUMER PRODUCTS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.