Correlation Between Coffee Holding and Aristocrat Leisure
Can any of the company-specific risk be diversified away by investing in both Coffee Holding and Aristocrat Leisure 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 Coffee Holding and Aristocrat Leisure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coffee Holding Co and Aristocrat Leisure Limited, you can compare the effects of market volatilities on Coffee Holding and Aristocrat Leisure 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 Coffee Holding with a short position of Aristocrat Leisure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coffee Holding and Aristocrat Leisure.
Diversification Opportunities for Coffee Holding and Aristocrat Leisure
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coffee and Aristocrat is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure and Coffee Holding 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 Coffee Holding Co are associated (or correlated) with Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Coffee Holding i.e., Coffee Holding and Aristocrat Leisure go up and down completely randomly.
Pair Corralation between Coffee Holding and Aristocrat Leisure
Assuming the 90 days horizon Coffee Holding Co is expected to generate 2.89 times more return on investment than Aristocrat Leisure. However, Coffee Holding is 2.89 times more volatile than Aristocrat Leisure Limited. It trades about 0.49 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about 0.12 per unit of risk. If you would invest 340.00 in Coffee Holding Co on November 30, 2024 and sell it today you would earn a total of 260.00 from holding Coffee Holding Co or generate 76.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Coffee Holding Co vs. Aristocrat Leisure Limited
Performance |
Timeline |
Coffee Holding |
Aristocrat Leisure |
Coffee Holding and Aristocrat Leisure Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coffee Holding and Aristocrat Leisure
The main advantage of trading using opposite Coffee Holding and Aristocrat Leisure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coffee Holding position performs unexpectedly, Aristocrat Leisure 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 Aristocrat Leisure will offset losses from the drop in Aristocrat Leisure's long position.Coffee Holding vs. GREENX METALS LTD | ||
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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