Correlation Between Westrock Coffee and Big Rock

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

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

Diversification Opportunities for Westrock Coffee and Big Rock

-0.4

Correlation Coefficient

Westrock Coffee  Big Rock

Very good diversification

The 3 months correlation between Westrock and Big is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery and Westrock 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 Westrock Coffee are associated (or correlated) with Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Big Rock go up and down completely randomly.

Pair Corralation between Westrock Coffee and Big Rock

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Big Rock. But the stock apears to be less risky and, when comparing its historical volatility, Westrock Coffee is 1.24 times less risky than Big Rock. The stock trades about -0.03 of its potential returns per unit of risk. The Big Rock Brewery is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Big Rock Brewery on September 5, 2024 and sell it today you would lose (20.00) from holding Big Rock Brewery or give up 13.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.3%
Values	Daily Returns

Westrock Coffee  vs.  Big Rock Brewery

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Big Rock is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Westrock Coffee and Big Rock

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

The idea behind Westrock Coffee and Big Rock Brewery 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.