Correlation Between Global E and Vita Coco
Can any of the company-specific risk be diversified away by investing in both Global E and Vita Coco 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 Global E and Vita Coco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Online and Vita Coco, you can compare the effects of market volatilities on Global E and Vita Coco 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 Global E with a short position of Vita Coco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and Vita Coco.
Diversification Opportunities for Global E and Vita Coco
Very poor diversification
The 3 months correlation between Global and Vita is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco and Global E 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 Global E Online are associated (or correlated) with Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Global E i.e., Global E and Vita Coco go up and down completely randomly.
Pair Corralation between Global E and Vita Coco
Given the investment horizon of 90 days Global E Online is expected to generate 1.08 times more return on investment than Vita Coco. However, Global E is 1.08 times more volatile than Vita Coco. It trades about 0.43 of its potential returns per unit of risk. Vita Coco is currently generating about 0.31 per unit of risk. If you would invest 3,849 in Global E Online on August 28, 2024 and sell it today you would earn a total of 1,317 from holding Global E Online or generate 34.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Online vs. Vita Coco
Performance |
| Timeline |
| Global E Online |
| Vita Coco |
Global E and Vita Coco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global E and Vita Coco
The main advantage of trading using opposite Global E and Vita Coco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E position performs unexpectedly, Vita Coco 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 Vita Coco will offset losses from the drop in Vita Coco's long position.The idea behind Global E Online and Vita Coco 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.| Vita Coco vs. Coca Cola Femsa SAB | Vita Coco vs. Coca Cola European Partners | Vita Coco vs. Embotelladora Andina SA | Vita Coco vs. Monster Beverage Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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