Correlation Between Spot Coffee and Alsea SAB

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

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

Diversification Opportunities for Spot Coffee and Alsea SAB

0.66

Correlation Coefficient

Spot Coffee  Alsea SAB

Poor diversification

The 3 months correlation between Spot and Alsea is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Spot Coffee and Alsea SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alsea SAB de and Spot 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 Spot Coffee are associated (or correlated) with Alsea SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alsea SAB de has no effect on the direction of Spot Coffee i.e., Spot Coffee and Alsea SAB go up and down completely randomly.

Pair Corralation between Spot Coffee and Alsea SAB

Assuming the 90 days horizon Spot Coffee is expected to generate 17.31 times more return on investment than Alsea SAB. However, Spot Coffee is 17.31 times more volatile than Alsea SAB de. It trades about 0.09 of its potential returns per unit of risk. Alsea SAB de is currently generating about 0.02 per unit of risk. If you would invest  3.30  in Spot Coffee on October 11, 2024 and sell it today you would lose (3.21) from holding Spot Coffee or give up 97.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	74.75%
Values	Daily Returns

Spot Coffee  vs.  Alsea SAB de

Spot Coffee

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 8 (%) 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.

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de 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 basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Spot Coffee and Alsea SAB

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

The idea behind Spot Coffee and Alsea SAB de 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.