Correlation Between Spot Coffee and Flanigans Enterprises

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

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

Diversification Opportunities for Spot Coffee and Flanigans Enterprises

0.37

Correlation Coefficient

Spot Coffee  Flanigans Enterprises

Weak diversification

The 3 months correlation between Spot and Flanigans is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Spot Coffee and Flanigans Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flanigans Enterprises 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 Flanigans Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flanigans Enterprises has no effect on the direction of Spot Coffee i.e., Spot Coffee and Flanigans Enterprises go up and down completely randomly.

Pair Corralation between Spot Coffee and Flanigans Enterprises

Assuming the 90 days horizon Spot Coffee is expected to generate 32.96 times more return on investment than Flanigans Enterprises. However, Spot Coffee is 32.96 times more volatile than Flanigans Enterprises. It trades about 0.17 of its potential returns per unit of risk. Flanigans Enterprises is currently generating about 0.05 per unit of risk. If you would invest  0.20  in Spot Coffee on December 2, 2024 and sell it today you would earn a total of  0.03  from holding Spot Coffee or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

Spot Coffee  vs.  Flanigans Enterprises

Spot Coffee

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 13 (%) 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.

Flanigans Enterprises

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Flanigans Enterprises are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Flanigans Enterprises is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Spot Coffee and Flanigans Enterprises

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

The idea behind Spot Coffee and Flanigans Enterprises 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.