Correlation Between Orient Technologies and Coal India

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

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

Diversification Opportunities for Orient Technologies and Coal India

-0.87

Correlation Coefficient

Orient Technologies  Coal India

Pay attention - limited upside

The 3 months correlation between Orient and Coal is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Orient Technologies Limited 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 Orient Technologies 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 Orient Technologies Limited 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 Orient Technologies i.e., Orient Technologies and Coal India go up and down completely randomly.

Pair Corralation between Orient Technologies and Coal India

Assuming the 90 days trading horizon Orient Technologies Limited is expected to generate 3.22 times more return on investment than Coal India. However, Orient Technologies is 3.22 times more volatile than Coal India Limited. It trades about 0.14 of its potential returns per unit of risk. Coal India Limited is currently generating about -0.37 per unit of risk. If you would invest  39,540  in Orient Technologies Limited on September 24, 2024 and sell it today you would earn a total of  3,520  from holding Orient Technologies Limited or generate 8.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Orient Technologies Limited  vs.  Coal India Limited

Orient Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Technologies Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Orient Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Orient Technologies and Coal India

The main advantage of trading using opposite Orient Technologies and Coal India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Technologies 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 Orient Technologies Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.