Correlation Between Figaro Coffee and SSI

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

Diversification Opportunities for Figaro Coffee and SSI

-0.12

Correlation Coefficient

Figaro Coffee  SSI

Good diversification

The 3 months correlation between Figaro and SSI is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group and SSI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSI Group 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 SSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSI Group has no effect on the direction of Figaro Coffee i.e., Figaro Coffee and SSI go up and down completely randomly.

Pair Corralation between Figaro Coffee and SSI

Assuming the 90 days trading horizon Figaro Coffee Group is expected to generate 1.04 times more return on investment than SSI. However, Figaro Coffee is 1.04 times more volatile than SSI Group. It trades about 0.23 of its potential returns per unit of risk. SSI Group is currently generating about 0.05 per unit of risk. If you would invest  83.00  in Figaro Coffee Group on October 5, 2024 and sell it today you would earn a total of  6.00  from holding Figaro Coffee Group or generate 7.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Figaro Coffee Group  vs.  SSI Group

Figaro Coffee Group

Risk-Adjusted Performance

0 of 100

Modest

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 unsteady technical and fundamental indicators, Figaro Coffee exhibited solid returns over the last few months and may actually be approaching a breakup point.

SSI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSI 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Figaro Coffee and SSI

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

The idea behind Figaro Coffee Group and SSI Group 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.