Correlation Between Western Copper and ETFS Coffee

Can any of the company-specific risk be diversified away by investing in both Western Copper and ETFS Coffee 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 Western Copper and ETFS Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Copper and and ETFS Coffee ETC, you can compare the effects of market volatilities on Western Copper and ETFS Coffee 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 Western Copper with a short position of ETFS Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Copper and ETFS Coffee.

Diversification Opportunities for Western Copper and ETFS Coffee

-0.36

Correlation Coefficient

Western Copper  ETFS Coffee

Very good diversification

The 3 months correlation between Western and ETFS is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Copper and and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC and Western Copper 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 Western Copper and are associated (or correlated) with ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of Western Copper i.e., Western Copper and ETFS Coffee go up and down completely randomly.

Pair Corralation between Western Copper and ETFS Coffee

Assuming the 90 days trading horizon Western Copper and is expected to under-perform the ETFS Coffee. In addition to that, Western Copper is 1.73 times more volatile than ETFS Coffee ETC. It trades about -0.03 of its total potential returns per unit of risk. ETFS Coffee ETC is currently generating about 0.13 per unit of volatility. If you would invest  5,279  in ETFS Coffee ETC on October 22, 2024 and sell it today you would earn a total of  172.00  from holding ETFS Coffee ETC or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Western Copper and  vs.  ETFS Coffee ETC

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ETFS Coffee ETC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Copper and ETFS Coffee

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

The idea behind Western Copper and and ETFS Coffee ETC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.