Correlation Between Coffee Day and Generic Engineering

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

Diversification Opportunities for Coffee Day and Generic Engineering

0.59

Correlation Coefficient

Coffee Day  Generic Engineering

Very weak diversification

The 3 months correlation between Coffee and Generic is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Day Enterprises and Generic Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generic Engineering 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 Generic Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generic Engineering has no effect on the direction of Coffee Day i.e., Coffee Day and Generic Engineering go up and down completely randomly.

Pair Corralation between Coffee Day and Generic Engineering

Assuming the 90 days trading horizon Coffee Day Enterprises is expected to generate 0.94 times more return on investment than Generic Engineering. However, Coffee Day Enterprises is 1.06 times less risky than Generic Engineering. It trades about 0.13 of its potential returns per unit of risk. Generic Engineering Construction is currently generating about 0.09 per unit of risk. If you would invest  2,962  in Coffee Day Enterprises on April 24, 2025 and sell it today you would earn a total of  830.00  from holding Coffee Day Enterprises or generate 28.02% return on investment over 90 days.

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

Coffee Day Enterprises  vs.  Generic Engineering Constructi

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 9 (%) 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.

Generic Engineering

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Generic Engineering Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Generic Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coffee Day and Generic Engineering

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

The idea behind Coffee Day Enterprises and Generic Engineering Construction 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.