Correlation Between Infrastrutture Wireless and ETFS Coffee

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

By analyzing existing cross correlation between Infrastrutture Wireless Italiane and ETFS Coffee ETC, you can compare the effects of market volatilities on Infrastrutture Wireless and ETFS Coffee 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 Infrastrutture Wireless with a short position of ETFS Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infrastrutture Wireless and ETFS Coffee.

Diversification Opportunities for Infrastrutture Wireless and ETFS Coffee

-0.42

Correlation Coefficient

Infrastrutture Wireless  ETFS Coffee

Very good diversification

The 3 months correlation between Infrastrutture and ETFS is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Infrastrutture Wireless Italia and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC and Infrastrutture Wireless 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 Infrastrutture Wireless Italiane are associated (or correlated) with ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of Infrastrutture Wireless i.e., Infrastrutture Wireless and ETFS Coffee go up and down completely randomly.

Pair Corralation between Infrastrutture Wireless and ETFS Coffee

Assuming the 90 days horizon Infrastrutture Wireless Italiane is expected to under-perform the ETFS Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Infrastrutture Wireless Italiane is 2.25 times less risky than ETFS Coffee. The stock trades about -0.03 of its potential returns per unit of risk. The ETFS Coffee ETC is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,796  in ETFS Coffee ETC on October 25, 2024 and sell it today you would earn a total of  1,548  from holding ETFS Coffee ETC or generate 40.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.61%
Values	Daily Returns

Infrastrutture Wireless Italia  vs.  ETFS Coffee ETC

Infrastrutture Wireless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastrutture Wireless Italiane has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Infrastrutture Wireless is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ETFS Coffee ETC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infrastrutture Wireless and ETFS Coffee

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

The idea behind Infrastrutture Wireless Italiane and ETFS Coffee ETC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.