Correlation Between Figaro Coffee and Allhome Corp

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

Diversification Opportunities for Figaro Coffee and Allhome Corp

0.23

Correlation Coefficient

Figaro Coffee  Allhome Corp

Modest diversification

The 3 months correlation between Figaro and Allhome is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group and Allhome Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allhome Corp 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 Allhome Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allhome Corp has no effect on the direction of Figaro Coffee i.e., Figaro Coffee and Allhome Corp go up and down completely randomly.

Pair Corralation between Figaro Coffee and Allhome Corp

Assuming the 90 days trading horizon Figaro Coffee Group is expected to generate 0.91 times more return on investment than Allhome Corp. However, Figaro Coffee Group is 1.1 times less risky than Allhome Corp. It trades about -0.02 of its potential returns per unit of risk. Allhome Corp is currently generating about -0.14 per unit of risk. If you would invest  85.00  in Figaro Coffee Group on October 24, 2024 and sell it today you would lose (1.00) from holding Figaro Coffee Group or give up 1.18% of portfolio value over 90 days.

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

Figaro Coffee Group  vs.  Allhome Corp

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Allhome Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allhome Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Figaro Coffee and Allhome Corp

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

The idea behind Figaro Coffee Group and Allhome Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.