Correlation Between Figaro Coffee and Bank of the

Can any of the company-specific risk be diversified away by investing in both Figaro Coffee and Bank of the 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 Bank of the 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 Bank of the, you can compare the effects of market volatilities on Figaro Coffee and Bank of the 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 Bank of the. Check out your portfolio center. Please also check ongoing floating volatility patterns of Figaro Coffee and Bank of the.

Diversification Opportunities for Figaro Coffee and Bank of the

-0.66

Correlation Coefficient

Figaro Coffee  Bank of the

Excellent diversification

The 3 months correlation between Figaro and Bank is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group and Bank of the in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of the 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 Bank of the. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of the has no effect on the direction of Figaro Coffee i.e., Figaro Coffee and Bank of the go up and down completely randomly.

Pair Corralation between Figaro Coffee and Bank of the

Assuming the 90 days trading horizon Figaro Coffee Group is expected to under-perform the Bank of the. In addition to that, Figaro Coffee is 1.39 times more volatile than Bank of the. It trades about -0.09 of its total potential returns per unit of risk. Bank of the is currently generating about 0.1 per unit of volatility. If you would invest  12,200  in Bank of the on December 30, 2024 and sell it today you would earn a total of  1,260  from holding Bank of the or generate 10.33% return on investment over 90 days.

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

Figaro Coffee Group  vs.  Bank of the

Figaro Coffee Group

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bank of the

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bank of the may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Figaro Coffee and Bank of the

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

The idea behind Figaro Coffee Group and Bank of the 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.