Correlation Between Figaro Coffee and Benguet Corp

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

By analyzing existing cross correlation between Figaro Coffee Group and Benguet Corp A, you can compare the effects of market volatilities on Figaro Coffee and Benguet Corp 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 Figaro Coffee with a short position of Benguet Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Figaro Coffee and Benguet Corp.

Diversification Opportunities for Figaro Coffee and Benguet Corp

0.36

Correlation Coefficient

Figaro Coffee  Benguet Corp

Weak diversification

The 3 months correlation between Figaro and Benguet is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group and Benguet Corp A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benguet Corp A and Figaro Coffee 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 Figaro Coffee Group are associated (or correlated) with Benguet Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benguet Corp A has no effect on the direction of Figaro Coffee i.e., Figaro Coffee and Benguet Corp go up and down completely randomly.

Pair Corralation between Figaro Coffee and Benguet Corp

Assuming the 90 days trading horizon Figaro Coffee Group is expected to generate 0.99 times more return on investment than Benguet Corp. However, Figaro Coffee Group is 1.01 times less risky than Benguet Corp. It trades about 0.02 of its potential returns per unit of risk. Benguet Corp A is currently generating about 0.0 per unit of risk. If you would invest  81.00  in Figaro Coffee Group on October 23, 2024 and sell it today you would earn a total of  4.00  from holding Figaro Coffee Group or generate 4.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	87.68%
Values	Daily Returns

Figaro Coffee Group  vs.  Benguet Corp A

Figaro Coffee Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Figaro Coffee Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Figaro Coffee is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Benguet Corp A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Benguet Corp A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Benguet Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Figaro Coffee and Benguet Corp

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

The idea behind Figaro Coffee Group and Benguet Corp A 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.