Correlation Between Westrock Coffee and Lamb Weston

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

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

Diversification Opportunities for Westrock Coffee and Lamb Weston

0.61

Correlation Coefficient

Westrock Coffee  Lamb Weston

Poor diversification

The 3 months correlation between Westrock and Lamb is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings 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 Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Lamb Weston go up and down completely randomly.

Pair Corralation between Westrock Coffee and Lamb Weston

Given the investment horizon of 90 days Westrock Coffee is expected to generate 0.71 times more return on investment than Lamb Weston. However, Westrock Coffee is 1.41 times less risky than Lamb Weston. It trades about -0.14 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about -0.13 per unit of risk. If you would invest  745.00  in Westrock Coffee on October 6, 2024 and sell it today you would lose (86.00) from holding Westrock Coffee or give up 11.54% of portfolio value over 90 days.

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

Westrock Coffee  vs.  Lamb Weston Holdings

Westrock Coffee

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westrock Coffee unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lamb Weston Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Westrock Coffee and Lamb Weston

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

The idea behind Westrock Coffee and Lamb Weston Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.