Correlation Between Fine Organic and Coal India

Can any of the company-specific risk be diversified away by investing in both Fine Organic and Coal India 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 Fine Organic and Coal India into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fine Organic Industries and Coal India Limited, you can compare the effects of market volatilities on Fine Organic and Coal India 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 Fine Organic with a short position of Coal India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fine Organic and Coal India.

Diversification Opportunities for Fine Organic and Coal India

0.49

Correlation Coefficient

Fine Organic  Coal India

Very weak diversification

The 3 months correlation between Fine and Coal is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fine Organic Industries and Coal India Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coal India Limited and Fine Organic 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 Fine Organic Industries are associated (or correlated) with Coal India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coal India Limited has no effect on the direction of Fine Organic i.e., Fine Organic and Coal India go up and down completely randomly.

Pair Corralation between Fine Organic and Coal India

Assuming the 90 days trading horizon Fine Organic Industries is expected to under-perform the Coal India. But the stock apears to be less risky and, when comparing its historical volatility, Fine Organic Industries is 1.16 times less risky than Coal India. The stock trades about -0.01 of its potential returns per unit of risk. The Coal India Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  18,464  in Coal India Limited on October 8, 2024 and sell it today you would earn a total of  20,901  from holding Coal India Limited or generate 113.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Fine Organic Industries  vs.  Coal India Limited

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Coal India Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coal India Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating 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.

Pair Trading with Fine Organic and Coal India

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

The idea behind Fine Organic Industries and Coal India 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 Global Correlations module to find global opportunities by holding instruments from different markets.