Correlation Between Westrock Coffee and KINDER

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

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

Diversification Opportunities for Westrock Coffee and KINDER

0.48

Correlation Coefficient

Westrock Coffee  KINDER

Very weak diversification

The 3 months correlation between Westrock and KINDER is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and KINDER go up and down completely randomly.

Pair Corralation between Westrock Coffee and KINDER

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the KINDER. But the stock apears to be less risky and, when comparing its historical volatility, Westrock Coffee is 27.75 times less risky than KINDER. The stock trades about -0.05 of its potential returns per unit of risk. The KINDER MORGAN ENERGY is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,860  in KINDER MORGAN ENERGY on October 22, 2024 and sell it today you would lose (367.00) from holding KINDER MORGAN ENERGY or give up 3.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.85%
Values	Daily Returns

Westrock Coffee  vs.  KINDER MORGAN ENERGY

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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Westrock Coffee and KINDER

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

The idea behind Westrock Coffee and KINDER MORGAN ENERGY 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.