Correlation Between Oil Natural and Coffee Day

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

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

Diversification Opportunities for Oil Natural and Coffee Day

0.61

Correlation Coefficient

Oil Natural  Coffee Day

Poor diversification

The 3 months correlation between Oil and Coffee is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Oil Natural Gas 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 Oil Natural 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 Oil Natural Gas 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 Oil Natural i.e., Oil Natural and Coffee Day go up and down completely randomly.

Pair Corralation between Oil Natural and Coffee Day

Assuming the 90 days trading horizon Oil Natural Gas is expected to generate 0.6 times more return on investment than Coffee Day. However, Oil Natural Gas is 1.68 times less risky than Coffee Day. It trades about -0.05 of its potential returns per unit of risk. Coffee Day Enterprises is currently generating about -0.12 per unit of risk. If you would invest  30,950  in Oil Natural Gas on October 22, 2024 and sell it today you would lose (4,293) from holding Oil Natural Gas or give up 13.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.19%
Values	Daily Returns

Oil Natural Gas  vs.  Coffee Day Enterprises

Oil Natural Gas

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Oil Natural Gas are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oil Natural is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Oil Natural and Coffee Day

The main advantage of trading using opposite Oil Natural and Coffee Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oil Natural 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 Oil Natural Gas 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.