Correlation Between Live Ventures and Spot Coffee

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

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

Diversification Opportunities for Live Ventures and Spot Coffee

0.24

Correlation Coefficient

Live Ventures  Spot Coffee

Modest diversification

The 3 months correlation between Live and Spot is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Live Ventures and Spot Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spot Coffee and Live Ventures 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 Live Ventures are associated (or correlated) with Spot Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spot Coffee has no effect on the direction of Live Ventures i.e., Live Ventures and Spot Coffee go up and down completely randomly.

Pair Corralation between Live Ventures and Spot Coffee

Given the investment horizon of 90 days Live Ventures is expected to under-perform the Spot Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Live Ventures is 10.94 times less risky than Spot Coffee. The stock trades about -0.18 of its potential returns per unit of risk. The Spot Coffee is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Spot Coffee on December 26, 2024 and sell it today you would earn a total of  0.13  from holding Spot Coffee or generate 130.0% return on investment over 90 days.

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

Live Ventures  vs.  Spot Coffee

Live Ventures

Risk-Adjusted Performance

Very Weak

Over the last 90 days Live Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Spot Coffee

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Spot Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Ventures and Spot Coffee

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

The idea behind Live Ventures and Spot Coffee 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.