Correlation Between Westrock Coffee and Small Cap

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

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

Diversification Opportunities for Westrock Coffee and Small Cap

-0.07

Correlation Coefficient

Westrock Coffee  Small Cap

Good diversification

The 3 months correlation between Westrock and Small is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Small Cap go up and down completely randomly.

Pair Corralation between Westrock Coffee and Small Cap

Given the investment horizon of 90 days Westrock Coffee is expected to generate 7.2 times more return on investment than Small Cap. However, Westrock Coffee is 7.2 times more volatile than Small Cap Premium. It trades about 0.03 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.08 per unit of risk. If you would invest  804.00  in Westrock Coffee on September 4, 2024 and sell it today you would earn a total of  22.00  from holding Westrock Coffee or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Westrock Coffee  vs.  Small Cap Premium

Westrock Coffee

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 2 (%) 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 January 2025.

Small Cap Premium

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Westrock Coffee and Small Cap

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

The idea behind Westrock Coffee and Small Cap Premium 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.