Correlation Between VARIOUS EATERIES and Coffee Holding

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

By analyzing existing cross correlation between VARIOUS EATERIES LS and Coffee Holding Co, you can compare the effects of market volatilities on VARIOUS EATERIES and Coffee Holding 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 VARIOUS EATERIES with a short position of Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and Coffee Holding.

Diversification Opportunities for VARIOUS EATERIES and Coffee Holding

-0.53

Correlation Coefficient

VARIOUS EATERIES  Coffee Holding

Excellent diversification

The 3 months correlation between VARIOUS and Coffee is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and Coffee Holding go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and Coffee Holding

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the Coffee Holding. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 2.93 times less risky than Coffee Holding. The stock trades about -0.35 of its potential returns per unit of risk. The Coffee Holding Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  390.00  in Coffee Holding Co on October 5, 2024 and sell it today you would lose (30.00) from holding Coffee Holding Co or give up 7.69% of portfolio value over 90 days.

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

VARIOUS EATERIES LS  vs.  Coffee Holding Co

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS 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.

Coffee Holding

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Coffee Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Coffee Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and Coffee Holding

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

The idea behind VARIOUS EATERIES LS and Coffee Holding Co 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.