Correlation Between Coromandel International and Khaitan Chemicals

Can any of the company-specific risk be diversified away by investing in both Coromandel International and Khaitan Chemicals 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 Khaitan Chemicals 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 Khaitan Chemicals Fertilizers, you can compare the effects of market volatilities on Coromandel International and Khaitan Chemicals 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 Khaitan Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coromandel International and Khaitan Chemicals.

Diversification Opportunities for Coromandel International and Khaitan Chemicals

-0.25

Correlation Coefficient

Coromandel International  Khaitan Chemicals

Very good diversification

The 3 months correlation between Coromandel and Khaitan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Coromandel International Limit and Khaitan Chemicals Fertilizers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khaitan Chemicals 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 Khaitan Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khaitan Chemicals has no effect on the direction of Coromandel International i.e., Coromandel International and Khaitan Chemicals go up and down completely randomly.

Pair Corralation between Coromandel International and Khaitan Chemicals

Assuming the 90 days trading horizon Coromandel International Limited is expected to generate 0.43 times more return on investment than Khaitan Chemicals. However, Coromandel International Limited is 2.34 times less risky than Khaitan Chemicals. It trades about 0.48 of its potential returns per unit of risk. Khaitan Chemicals Fertilizers is currently generating about -0.02 per unit of risk. If you would invest  175,795  in Coromandel International Limited on October 5, 2024 and sell it today you would earn a total of  19,810  from holding Coromandel International Limited or generate 11.27% return on investment over 90 days.

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

Coromandel International Limit  vs.  Khaitan Chemicals Fertilizers

Coromandel International

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coromandel International Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Coromandel International displayed solid returns over the last few months and may actually be approaching a breakup point.

Khaitan Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Khaitan Chemicals Fertilizers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Khaitan Chemicals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coromandel International and Khaitan Chemicals

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

The idea behind Coromandel International Limited and Khaitan Chemicals Fertilizers 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.