Correlation Between Kaynes Technology and Coffee Day

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

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

Diversification Opportunities for Kaynes Technology and Coffee Day

0.2

Correlation Coefficient

Kaynes Technology  Coffee Day

Modest diversification

The 3 months correlation between Kaynes and Coffee is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kaynes Technology India 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 Kaynes Technology 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 Kaynes Technology India 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 Kaynes Technology i.e., Kaynes Technology and Coffee Day go up and down completely randomly.

Pair Corralation between Kaynes Technology and Coffee Day

Assuming the 90 days trading horizon Kaynes Technology India is expected to under-perform the Coffee Day. But the stock apears to be less risky and, when comparing its historical volatility, Kaynes Technology India is 1.32 times less risky than Coffee Day. The stock trades about -0.13 of its potential returns per unit of risk. The Coffee Day Enterprises is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,382  in Coffee Day Enterprises on December 26, 2024 and sell it today you would earn a total of  628.00  from holding Coffee Day Enterprises or generate 26.36% return on investment over 90 days.

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

Kaynes Technology India  vs.  Coffee Day Enterprises

Kaynes Technology India

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaynes Technology India has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Coffee Day Enterprises

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Day Enterprises are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Coffee Day exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaynes Technology and Coffee Day

The main advantage of trading using opposite Kaynes Technology and Coffee Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaynes Technology 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 Kaynes Technology India 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.