Correlation Between Coromandel International and Avonmore Capital

Can any of the company-specific risk be diversified away by investing in both Coromandel International and Avonmore Capital 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 Coromandel International and Avonmore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coromandel International Limited and Avonmore Capital Management, you can compare the effects of market volatilities on Coromandel International and Avonmore Capital 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 Coromandel International with a short position of Avonmore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coromandel International and Avonmore Capital.

Diversification Opportunities for Coromandel International and Avonmore Capital

0.21

Correlation Coefficient

Coromandel International  Avonmore Capital

Modest diversification

The 3 months correlation between Coromandel and Avonmore is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Coromandel International Limit and Avonmore Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avonmore Capital Man and Coromandel International 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 Coromandel International Limited are associated (or correlated) with Avonmore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avonmore Capital Man has no effect on the direction of Coromandel International i.e., Coromandel International and Avonmore Capital go up and down completely randomly.

Pair Corralation between Coromandel International and Avonmore Capital

Assuming the 90 days trading horizon Coromandel International Limited is expected to generate 0.45 times more return on investment than Avonmore Capital. However, Coromandel International Limited is 2.2 times less risky than Avonmore Capital. It trades about 0.05 of its potential returns per unit of risk. Avonmore Capital Management is currently generating about 0.01 per unit of risk. If you would invest  186,298  in Coromandel International Limited on December 30, 2024 and sell it today you would earn a total of  11,912  from holding Coromandel International Limited or generate 6.39% return on investment over 90 days.

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

Coromandel International Limit  vs.  Avonmore Capital Management

Coromandel International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coromandel International Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Coromandel International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Avonmore Capital Man

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avonmore Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Avonmore Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Coromandel International and Avonmore Capital

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

The idea behind Coromandel International Limited and Avonmore Capital Management 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.