Correlation Between Vita Coco and Metal Sky

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

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

Diversification Opportunities for Vita Coco and Metal Sky

-0.37

Correlation Coefficient

Vita Coco  Metal Sky

Very good diversification

The 3 months correlation between Vita and Metal is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star and Vita Coco 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 Vita Coco are associated (or correlated) with Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of Vita Coco i.e., Vita Coco and Metal Sky go up and down completely randomly.

Pair Corralation between Vita Coco and Metal Sky

Given the investment horizon of 90 days Vita Coco is expected to under-perform the Metal Sky. But the stock apears to be less risky and, when comparing its historical volatility, Vita Coco is 6.39 times less risky than Metal Sky. The stock trades about 0.0 of its potential returns per unit of risk. The Metal Sky Star is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  5.01  in Metal Sky Star on December 19, 2024 and sell it today you would earn a total of  3.78  from holding Metal Sky Star or generate 75.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.37%
Values	Daily Returns

Vita Coco  vs.  Metal Sky Star

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Vita Coco is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Metal Sky Star

Risk-Adjusted Performance

Solid

Over the last 90 days Metal Sky Star has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain basic indicators, Metal Sky reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vita Coco and Metal Sky

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

The idea behind Vita Coco and Metal Sky Star 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.