Correlation Between Yerbae Brands and SPoT Coffee

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

By analyzing existing cross correlation between Yerbae Brands Corp and SPoT Coffee, you can compare the effects of market volatilities on Yerbae Brands and SPoT 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 Yerbae Brands with a short position of SPoT Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Yerbae Brands and SPoT Coffee.

Diversification Opportunities for Yerbae Brands and SPoT Coffee

0.0

Correlation Coefficient

Yerbae Brands  SPoT Coffee

Pay attention - limited upside

The 3 months correlation between Yerbae and SPoT is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Yerbae Brands Corp and SPoT Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPoT Coffee and Yerbae Brands 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 Yerbae Brands Corp are associated (or correlated) with SPoT Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPoT Coffee has no effect on the direction of Yerbae Brands i.e., Yerbae Brands and SPoT Coffee go up and down completely randomly.

Pair Corralation between Yerbae Brands and SPoT Coffee

Assuming the 90 days trading horizon Yerbae Brands Corp is expected to under-perform the SPoT Coffee. But the stock apears to be less risky and, when comparing its historical volatility, Yerbae Brands Corp is 1.1 times less risky than SPoT Coffee. The stock trades about -0.03 of its potential returns per unit of risk. The SPoT Coffee is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.50  in SPoT Coffee on October 4, 2024 and sell it today you would lose (6.00) from holding SPoT Coffee or give up 80.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.76%
Values	Daily Returns

Yerbae Brands Corp  vs.  SPoT Coffee

Yerbae Brands Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yerbae Brands Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Yerbae Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

SPoT Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Yerbae Brands and SPoT Coffee

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

The idea behind Yerbae Brands Corp and SPoT Coffee 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.