Correlation Between Deluxe and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both Deluxe and Coffee Holding 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 Deluxe and Coffee Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Deluxe and Coffee Holding Co, you can compare the effects of market volatilities on Deluxe and Coffee Holding 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 Deluxe with a short position of Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deluxe and Coffee Holding.
Diversification Opportunities for Deluxe and Coffee Holding
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Deluxe and Coffee is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding and Deluxe 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 Deluxe are associated (or correlated) with Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Deluxe i.e., Deluxe and Coffee Holding go up and down completely randomly.
Pair Corralation between Deluxe and Coffee Holding
Considering the 90-day investment horizon Deluxe is expected to generate 3.95 times less return on investment than Coffee Holding. But when comparing it to its historical volatility, Deluxe is 2.8 times less risky than Coffee Holding. It trades about 0.09 of its potential returns per unit of risk. Coffee Holding Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 209.00 in Coffee Holding Co on November 2, 2024 and sell it today you would earn a total of 191.00 from holding Coffee Holding Co or generate 91.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deluxe vs. Coffee Holding Co
Performance |
| Timeline |
| Deluxe |
| Coffee Holding |
Deluxe and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deluxe and Coffee Holding
The main advantage of trading using opposite Deluxe and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.| Deluxe vs. Criteo Sa | Deluxe vs. Emerald Expositions Events | Deluxe vs. Marchex | Deluxe vs. Integral Ad Science |
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Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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