Correlation Between ETFS Coffee and BOSTON BEER

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

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

Diversification Opportunities for ETFS Coffee and BOSTON BEER

0.2

Correlation Coefficient

ETFS Coffee  BOSTON BEER

Modest diversification

The 3 months correlation between ETFS and BOSTON is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A and ETFS Coffee 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 ETFS Coffee ETC are associated (or correlated) with BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and BOSTON BEER go up and down completely randomly.

Pair Corralation between ETFS Coffee and BOSTON BEER

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 1.46 times more return on investment than BOSTON BEER. However, ETFS Coffee is 1.46 times more volatile than BOSTON BEER A . It trades about 0.23 of its potential returns per unit of risk. BOSTON BEER A is currently generating about -0.09 per unit of risk. If you would invest  3,901  in ETFS Coffee ETC on October 22, 2024 and sell it today you would earn a total of  1,550  from holding ETFS Coffee ETC or generate 39.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

ETFS Coffee ETC  vs.  BOSTON BEER A

ETFS Coffee ETC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

BOSTON BEER A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOSTON BEER A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ETFS Coffee and BOSTON BEER

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

The idea behind ETFS Coffee ETC and BOSTON BEER A 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.