Correlation Between Coffee Holding and Aristocrat Leisure

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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

CoffeeAristocratDiversified AwayCoffeeAristocratDiversified Away100%
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 Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Coffee Holding Co  vs.  Aristocrat Leisure Limited

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 020406080
JavaScript chart by amCharts 3.21.15E6U AC8
       Timeline  
Coffee Holding 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coffee Holding reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3.544.555.56
Aristocrat Leisure 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aristocrat Leisure may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb41424344454647

Coffee Holding and Aristocrat Leisure Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-15.64-11.71-7.79-3.860.07284.298.6613.0317.39 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15E6U AC8
       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.
The idea behind Coffee Holding Co and Aristocrat Leisure Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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