Correlation Between Westrock Coffee and Kenvue

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Can any of the company-specific risk be diversified away by investing in both Westrock Coffee and Kenvue 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 Kenvue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westrock Coffee and Kenvue Inc, you can compare the effects of market volatilities on Westrock Coffee and Kenvue 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 Kenvue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westrock Coffee and Kenvue.

Diversification Opportunities for Westrock Coffee and Kenvue

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Westrock and Kenvue is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Kenvue go up and down completely randomly.

Pair Corralation between Westrock Coffee and Kenvue

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Kenvue. In addition to that, Westrock Coffee is 1.51 times more volatile than Kenvue Inc. It trades about -0.05 of its total potential returns per unit of risk. Kenvue Inc is currently generating about -0.02 per unit of volatility. If you would invest  2,538  in Kenvue Inc on October 4, 2024 and sell it today you would lose (403.00) from holding Kenvue Inc or give up 15.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy84.65%
ValuesDaily Returns

Westrock Coffee  vs.  Kenvue Inc

 Performance 
       Timeline  
Westrock Coffee 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westrock Coffee may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Kenvue Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Kenvue Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kenvue is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Westrock Coffee and Kenvue Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Westrock Coffee and Kenvue

The main advantage of trading using opposite Westrock Coffee and Kenvue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee position performs unexpectedly, Kenvue 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 Kenvue will offset losses from the drop in Kenvue's long position.
The idea behind Westrock Coffee and Kenvue Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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