Correlation Between Lifevantage and Coffee Holding

Can any of the company-specific risk be diversified away by investing in both Lifevantage and Coffee Holding 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 Lifevantage and Coffee Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lifevantage and Coffee Holding Co, you can compare the effects of market volatilities on Lifevantage and Coffee Holding 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 Lifevantage with a short position of Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifevantage and Coffee Holding.

Diversification Opportunities for Lifevantage and Coffee Holding

-0.4

Correlation Coefficient

Lifevantage  Coffee Holding

Very good diversification

The 3 months correlation between Lifevantage and Coffee is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lifevantage and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding and Lifevantage 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 Lifevantage are associated (or correlated) with Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Lifevantage i.e., Lifevantage and Coffee Holding go up and down completely randomly.

Pair Corralation between Lifevantage and Coffee Holding

Given the investment horizon of 90 days Lifevantage is expected to under-perform the Coffee Holding. But the stock apears to be less risky and, when comparing its historical volatility, Lifevantage is 1.43 times less risky than Coffee Holding. The stock trades about -0.03 of its potential returns per unit of risk. The Coffee Holding Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Lifevantage  vs.  Coffee Holding Co

Lifevantage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lifevantage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.

Pair Trading with Lifevantage and Coffee Holding

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

The idea behind Lifevantage and Coffee Holding Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.