Correlation Between United States and Coffee Holding

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

By analyzing existing cross correlation between United States Steel and Coffee Holding Co, you can compare the effects of market volatilities on United States and Coffee Holding 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 United States with a short position of Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Coffee Holding.

Diversification Opportunities for United States and Coffee Holding

0.0

Correlation Coefficient

United States  Coffee Holding

Pay attention - limited upside

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

Pair Corralation between United States and Coffee Holding

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Coffee Holding. But the stock apears to be less risky and, when comparing its historical volatility, United States Steel is 1.92 times less risky than Coffee Holding. The stock trades about -0.44 of its potential returns per unit of risk. The Coffee Holding Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  340.00  in Coffee Holding Co on September 23, 2024 and sell it today you would lose (4.00) from holding Coffee Holding Co or give up 1.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United States Steel  vs.  Coffee Holding Co

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Coffee Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coffee Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United States and Coffee Holding

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

The idea behind United States Steel and Coffee Holding Co 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.