Correlation Between SPoT Coffee and Western Investment

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

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

Diversification Opportunities for SPoT Coffee and Western Investment

0.0

Correlation Coefficient

SPoT Coffee  Western Investment

Pay attention - limited upside

The 3 months correlation between SPoT and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPoT Coffee and Western Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Investment 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 Western Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Investment has no effect on the direction of SPoT Coffee i.e., SPoT Coffee and Western Investment go up and down completely randomly.

Pair Corralation between SPoT Coffee and Western Investment

If you would invest  1.50  in SPoT Coffee on December 28, 2024 and sell it today you would earn a total of  0.00  from holding SPoT Coffee or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

SPoT Coffee  vs.  Western Investment

SPoT Coffee

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPoT Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPoT Coffee is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Western Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Western Investment is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SPoT Coffee and Western Investment

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

The idea behind SPoT Coffee and Western Investment 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.