Correlation Between Coffee Day and Garware Hi

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Can any of the company-specific risk be diversified away by investing in both Coffee Day and Garware Hi 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 Coffee Day and Garware Hi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coffee Day Enterprises and Garware Hi Tech Films, you can compare the effects of market volatilities on Coffee Day and Garware Hi 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 Coffee Day with a short position of Garware Hi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coffee Day and Garware Hi.

Diversification Opportunities for Coffee Day and Garware Hi

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Coffee and Garware is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Garware Hi Tech Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garware Hi Tech and Coffee Day 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 Coffee Day Enterprises are associated (or correlated) with Garware Hi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garware Hi Tech has no effect on the direction of Coffee Day i.e., Coffee Day and Garware Hi go up and down completely randomly.

Pair Corralation between Coffee Day and Garware Hi

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to under-perform the Garware Hi. But the stock apears to be less risky and, when comparing its historical volatility, Coffee Day Enterprises is 1.5 times less risky than Garware Hi. The stock trades about -0.23 of its potential returns per unit of risk. The Garware Hi Tech Films is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  386,175  in Garware Hi Tech Films on August 30, 2024 and sell it today you would earn a total of  90,155  from holding Garware Hi Tech Films or generate 23.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.62%
ValuesDaily Returns

Coffee Day Enterprises  vs.  Garware Hi Tech Films

 Performance 
       Timeline  
Coffee Day Enterprises 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Garware Hi Tech 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Garware Hi Tech Films are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Garware Hi unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coffee Day and Garware Hi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coffee Day and Garware Hi

The main advantage of trading using opposite Coffee Day and Garware Hi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coffee Day position performs unexpectedly, Garware Hi 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 Garware Hi will offset losses from the drop in Garware Hi's long position.
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The idea behind Coffee Day Enterprises and Garware Hi Tech Films 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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