Correlation Between Kavveri Telecom and Coffee Day

Can any of the company-specific risk be diversified away by investing in both Kavveri Telecom and Coffee Day 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 Kavveri Telecom and Coffee Day into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kavveri Telecom Products and Coffee Day Enterprises, you can compare the effects of market volatilities on Kavveri Telecom and Coffee Day 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 Kavveri Telecom with a short position of Coffee Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kavveri Telecom and Coffee Day.

Diversification Opportunities for Kavveri Telecom and Coffee Day

-0.36

Correlation Coefficient

Kavveri Telecom  Coffee Day

Very good diversification

The 3 months correlation between Kavveri and Coffee is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kavveri Telecom Products and Coffee Day Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Day Enterprises and Kavveri Telecom 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 Kavveri Telecom Products are associated (or correlated) with Coffee Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Day Enterprises has no effect on the direction of Kavveri Telecom i.e., Kavveri Telecom and Coffee Day go up and down completely randomly.

Pair Corralation between Kavveri Telecom and Coffee Day

Assuming the 90 days trading horizon Kavveri Telecom Products is expected to generate 0.94 times more return on investment than Coffee Day. However, Kavveri Telecom Products is 1.07 times less risky than Coffee Day. It trades about 0.22 of its potential returns per unit of risk. Coffee Day Enterprises is currently generating about -0.09 per unit of risk. If you would invest  1,475  in Kavveri Telecom Products on October 9, 2024 and sell it today you would earn a total of  4,605  from holding Kavveri Telecom Products or generate 312.2% return on investment over 90 days.

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

Kavveri Telecom Products  vs.  Coffee Day Enterprises

Kavveri Telecom Products

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kavveri Telecom Products are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Kavveri Telecom demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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 Kavveri Telecom and Coffee Day

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

The idea behind Kavveri Telecom Products and Coffee Day Enterprises 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.