Correlation Between Delek Logistics and Westrock Coffee

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

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

Diversification Opportunities for Delek Logistics and Westrock Coffee

-0.44

Correlation Coefficient

Delek Logistics  Westrock Coffee

Very good diversification

The 3 months correlation between Delek and Westrock is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee and Delek Logistics 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 Delek Logistics Partners are associated (or correlated) with Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Delek Logistics i.e., Delek Logistics and Westrock Coffee go up and down completely randomly.

Pair Corralation between Delek Logistics and Westrock Coffee

Considering the 90-day investment horizon Delek Logistics Partners is expected to generate 0.29 times more return on investment than Westrock Coffee. However, Delek Logistics Partners is 3.47 times less risky than Westrock Coffee. It trades about 0.28 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.12 per unit of risk. If you would invest  3,959  in Delek Logistics Partners on October 26, 2024 and sell it today you would earn a total of  472.00  from holding Delek Logistics Partners or generate 11.92% return on investment over 90 days.

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

Delek Logistics Partners  vs.  Westrock Coffee

Delek Logistics Partners

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Logistics Partners are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Delek Logistics disclosed solid returns over the last few months and may actually be approaching a breakup point.

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Delek Logistics and Westrock Coffee

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

The idea behind Delek Logistics Partners and Westrock Coffee 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.