Correlation Between Coffee Holding and Smart For

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

Diversification Opportunities for Coffee Holding and Smart For

-0.71

Correlation Coefficient

Coffee Holding  Smart For

Pay attention - limited upside

The 3 months correlation between Coffee and Smart is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and Smart for Life, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart for Life, 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 Smart For. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart for Life, has no effect on the direction of Coffee Holding i.e., Coffee Holding and Smart For go up and down completely randomly.

Pair Corralation between Coffee Holding and Smart For

Considering the 90-day investment horizon Coffee Holding Co is expected to generate 0.31 times more return on investment than Smart For. However, Coffee Holding Co is 3.18 times less risky than Smart For. It trades about 0.15 of its potential returns per unit of risk. Smart for Life, is currently generating about -0.06 per unit of risk. If you would invest  80.00  in Coffee Holding Co on September 4, 2024 and sell it today you would earn a total of  336.00  from holding Coffee Holding Co or generate 420.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.38%
Values	Daily Returns

Coffee Holding Co  vs.  Smart for Life,

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.

Smart for Life,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smart for Life, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Coffee Holding and Smart For

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

The idea behind Coffee Holding Co and Smart for Life, 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.