Correlation Between Spencers Retail and Coal India

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

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

Diversification Opportunities for Spencers Retail and Coal India

-0.02

Correlation Coefficient

Spencers Retail  Coal India

Good diversification

The 3 months correlation between Spencers and Coal is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Spencers Retail 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 Spencers Retail 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 Spencers Retail 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 Spencers Retail i.e., Spencers Retail and Coal India go up and down completely randomly.

Pair Corralation between Spencers Retail and Coal India

Assuming the 90 days trading horizon Spencers Retail Limited is expected to under-perform the Coal India. In addition to that, Spencers Retail is 2.25 times more volatile than Coal India Limited. It trades about -0.07 of its total potential returns per unit of risk. Coal India Limited is currently generating about 0.07 per unit of volatility. If you would invest  37,240  in Coal India Limited on December 28, 2024 and sell it today you would earn a total of  2,445  from holding Coal India Limited or generate 6.57% return on investment over 90 days.

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

Spencers Retail Limited  vs.  Coal India Limited

Spencers Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spencers Retail Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Coal India Limited

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coal India Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Coal India may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Spencers Retail and Coal India

The main advantage of trading using opposite Spencers Retail and Coal India positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spencers Retail 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 Spencers Retail 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.