Correlation Between Coffee Holding and Better Choice

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

Diversification Opportunities for Coffee Holding and Better Choice

-0.62

Correlation Coefficient

Coffee Holding  Better Choice

Excellent diversification

The 3 months correlation between Coffee and Better is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice 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 Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Coffee Holding i.e., Coffee Holding and Better Choice go up and down completely randomly.

Pair Corralation between Coffee Holding and Better Choice

Considering the 90-day investment horizon Coffee Holding Co is expected to generate 0.97 times more return on investment than Better Choice. However, Coffee Holding Co is 1.03 times less risky than Better Choice. It trades about 0.19 of its potential returns per unit of risk. Better Choice is currently generating about 0.02 per unit of risk. If you would invest  204.00  in Coffee Holding Co on September 4, 2024 and sell it today you would earn a total of  198.00  from holding Coffee Holding Co or generate 97.06% return on investment over 90 days.

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

Coffee Holding Co  vs.  Better Choice

Coffee Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coffee Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Better Choice

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Better Choice are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Better Choice may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coffee Holding and Better Choice

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

The idea behind Coffee Holding Co and Better Choice 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.