Correlation Between Coffee Holding and Natures Sunshine

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

Diversification Opportunities for Coffee Holding and Natures Sunshine

0.05

Correlation Coefficient

Coffee Holding  Natures Sunshine

Significant diversification

The 3 months correlation between Coffee and Natures is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and Natures Sunshine Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natures Sunshine Products 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 Natures Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natures Sunshine Products has no effect on the direction of Coffee Holding i.e., Coffee Holding and Natures Sunshine go up and down completely randomly.

Pair Corralation between Coffee Holding and Natures Sunshine

Considering the 90-day investment horizon Coffee Holding Co is expected to generate 3.64 times more return on investment than Natures Sunshine. However, Coffee Holding is 3.64 times more volatile than Natures Sunshine Products. It trades about 0.02 of its potential returns per unit of risk. Natures Sunshine Products is currently generating about -0.11 per unit of risk. If you would invest  356.00  in Coffee Holding Co on December 30, 2024 and sell it today you would lose (32.00) from holding Coffee Holding Co or give up 8.99% of portfolio value over 90 days.

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

Coffee Holding Co  vs.  Natures Sunshine Products

Coffee Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coffee Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Natures Sunshine Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natures Sunshine Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Coffee Holding and Natures Sunshine

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

The idea behind Coffee Holding Co and Natures Sunshine Products 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.