Correlation Between ETFS Coffee and DENSO Dusseldorf

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

Diversification Opportunities for ETFS Coffee and DENSO Dusseldorf

-0.06

Correlation Coefficient

ETFS Coffee  DENSO Dusseldorf

Good diversification

The 3 months correlation between ETFS and DENSO is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and DENSO Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO Dusseldorf 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 DENSO Dusseldorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO Dusseldorf has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and DENSO Dusseldorf go up and down completely randomly.

Pair Corralation between ETFS Coffee and DENSO Dusseldorf

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 0.82 times more return on investment than DENSO Dusseldorf. However, ETFS Coffee ETC is 1.22 times less risky than DENSO Dusseldorf. It trades about 0.13 of its potential returns per unit of risk. DENSO Dusseldorf is currently generating about 0.07 per unit of risk. If you would invest  5,279  in ETFS Coffee ETC on October 22, 2024 and sell it today you would earn a total of  172.00  from holding ETFS Coffee ETC or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

ETFS Coffee ETC  vs.  DENSO Dusseldorf

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.

DENSO Dusseldorf

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DENSO Dusseldorf are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DENSO Dusseldorf is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ETFS Coffee and DENSO Dusseldorf

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

The idea behind ETFS Coffee ETC and DENSO Dusseldorf 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.