Correlation Between Coffee Holding and Santander Bank

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

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

Diversification Opportunities for Coffee Holding and Santander Bank

0.19

Correlation Coefficient

Coffee Holding  Santander Bank

Average diversification

The 3 months correlation between Coffee and Santander is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and Santander Bank Polska in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santander Bank Polska and Coffee Holding 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 Coffee Holding Co are associated (or correlated) with Santander Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santander Bank Polska has no effect on the direction of Coffee Holding i.e., Coffee Holding and Santander Bank go up and down completely randomly.

Pair Corralation between Coffee Holding and Santander Bank

Assuming the 90 days horizon Coffee Holding Co is expected to generate 1.59 times more return on investment than Santander Bank. However, Coffee Holding is 1.59 times more volatile than Santander Bank Polska. It trades about 0.12 of its potential returns per unit of risk. Santander Bank Polska is currently generating about 0.05 per unit of risk. If you would invest  101.00  in Coffee Holding Co on October 2, 2024 and sell it today you would earn a total of  259.00  from holding Coffee Holding Co or generate 256.44% return on investment over 90 days.

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

Coffee Holding Co  vs.  Santander Bank Polska

Coffee Holding

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coffee Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Santander Bank Polska

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Santander Bank Polska are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Santander Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coffee Holding and Santander Bank

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

The idea behind Coffee Holding Co and Santander Bank Polska 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.