Correlation Between Vita Coco and Nongfu Spring

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

By analyzing existing cross correlation between Vita Coco and Nongfu Spring Co, you can compare the effects of market volatilities on Vita Coco and Nongfu Spring 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 Nongfu Spring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vita Coco and Nongfu Spring.

Diversification Opportunities for Vita Coco and Nongfu Spring

0.48

Correlation Coefficient

Vita Coco  Nongfu Spring

Very weak diversification

The 3 months correlation between Vita and Nongfu is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Nongfu Spring Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nongfu Spring 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 Nongfu Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nongfu Spring has no effect on the direction of Vita Coco i.e., Vita Coco and Nongfu Spring go up and down completely randomly.

Pair Corralation between Vita Coco and Nongfu Spring

Given the investment horizon of 90 days Vita Coco is expected to generate 0.58 times more return on investment than Nongfu Spring. However, Vita Coco is 1.73 times less risky than Nongfu Spring. It trades about 0.09 of its potential returns per unit of risk. Nongfu Spring Co is currently generating about -0.04 per unit of risk. If you would invest  2,825  in Vita Coco on September 5, 2024 and sell it today you would earn a total of  750.00  from holding Vita Coco or generate 26.55% return on investment over 90 days.

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

Vita Coco  vs.  Nongfu Spring Co

Vita Coco

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Nongfu Spring

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Nongfu Spring reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vita Coco and Nongfu Spring

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

The idea behind Vita Coco and Nongfu Spring 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.