Correlation Between Coffee Day and Compucom Software

Can any of the company-specific risk be diversified away by investing in both Coffee Day and Compucom Software 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 Compucom Software 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 Compucom Software Limited, you can compare the effects of market volatilities on Coffee Day and Compucom Software 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 Compucom Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coffee Day and Compucom Software.

Diversification Opportunities for Coffee Day and Compucom Software

0.63

Correlation Coefficient

Coffee Day  Compucom Software

Poor diversification

The 3 months correlation between Coffee and Compucom is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Compucom Software Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compucom Software 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 Compucom Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compucom Software has no effect on the direction of Coffee Day i.e., Coffee Day and Compucom Software go up and down completely randomly.

Pair Corralation between Coffee Day and Compucom Software

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to generate 1.27 times more return on investment than Compucom Software. However, Coffee Day is 1.27 times more volatile than Compucom Software Limited. It trades about 0.16 of its potential returns per unit of risk. Compucom Software Limited is currently generating about 0.06 per unit of risk. If you would invest  2,848  in Coffee Day Enterprises on April 22, 2025 and sell it today you would earn a total of  1,099  from holding Coffee Day Enterprises or generate 38.59% return on investment over 90 days.

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

Coffee Day Enterprises  vs.  Compucom Software Limited

Coffee Day Enterprises

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Day Enterprises are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Coffee Day exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compucom Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compucom Software Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Compucom Software may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Coffee Day and Compucom Software

The main advantage of trading using opposite Coffee Day and Compucom Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coffee Day position performs unexpectedly, Compucom Software 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 Compucom Software will offset losses from the drop in Compucom Software's long position.

The idea behind Coffee Day Enterprises and Compucom Software 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.