Correlation Between Westrock Coffee and Bt Brands

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

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

Diversification Opportunities for Westrock Coffee and Bt Brands

-0.17

Correlation Coefficient

Westrock Coffee  Bt Brands

Good diversification

The 3 months correlation between Westrock and BTBD is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Bt Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bt Brands 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 Bt Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bt Brands has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Bt Brands go up and down completely randomly.

Pair Corralation between Westrock Coffee and Bt Brands

Given the investment horizon of 90 days Westrock Coffee is expected to generate 0.89 times more return on investment than Bt Brands. However, Westrock Coffee is 1.12 times less risky than Bt Brands. It trades about -0.04 of its potential returns per unit of risk. Bt Brands is currently generating about -0.06 per unit of risk. If you would invest  702.00  in Westrock Coffee on September 21, 2024 and sell it today you would lose (62.00) from holding Westrock Coffee or give up 8.83% of portfolio value over 90 days.

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

Westrock Coffee  vs.  Bt Brands

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.

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Westrock Coffee and Bt Brands

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

The idea behind Westrock Coffee and Bt Brands 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.