Correlation Between Collective Mining and Vita Coco

Can any of the company-specific risk be diversified away by investing in both Collective Mining and Vita Coco 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 Collective Mining and Vita Coco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Collective Mining and Vita Coco, you can compare the effects of market volatilities on Collective Mining and Vita Coco 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 Collective Mining with a short position of Vita Coco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collective Mining and Vita Coco.

Diversification Opportunities for Collective Mining and Vita Coco

0.67

Correlation Coefficient

Collective Mining  Vita Coco

Poor diversification

The 3 months correlation between Collective and Vita is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Collective Mining and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco and Collective Mining 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 Collective Mining are associated (or correlated) with Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Collective Mining i.e., Collective Mining and Vita Coco go up and down completely randomly.

Pair Corralation between Collective Mining and Vita Coco

Considering the 90-day investment horizon Collective Mining is expected to generate 1.49 times more return on investment than Vita Coco. However, Collective Mining is 1.49 times more volatile than Vita Coco. It trades about 0.37 of its potential returns per unit of risk. Vita Coco is currently generating about 0.07 per unit of risk. If you would invest  353.00  in Collective Mining on November 28, 2024 and sell it today you would earn a total of  294.00  from holding Collective Mining or generate 83.29% return on investment over 90 days.

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

Collective Mining  vs.  Vita Coco

Collective Mining

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Collective Mining are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Collective Mining disclosed solid returns over the last few months and may actually be approaching a breakup point.

Vita Coco

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Collective Mining and Vita Coco

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

The idea behind Collective Mining and Vita Coco 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.