Correlation Between Marstons PLC and Spot Coffee
Can any of the company-specific risk be diversified away by investing in both Marstons PLC 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 Marstons PLC and Spot Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marstons PLC and Spot Coffee, you can compare the effects of market volatilities on Marstons PLC 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 Marstons PLC with a short position of Spot Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marstons PLC and Spot Coffee.
Diversification Opportunities for Marstons PLC and Spot Coffee
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Marstons and Spot is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Spot Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spot Coffee and Marstons PLC 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 Marstons PLC 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 Marstons PLC i.e., Marstons PLC and Spot Coffee go up and down completely randomly.
Pair Corralation between Marstons PLC and Spot Coffee
Assuming the 90 days horizon Marstons PLC is expected to generate 51.4 times less return on investment than Spot Coffee. But when comparing it to its historical volatility, Marstons PLC is 21.86 times less risky than Spot Coffee. It trades about 0.04 of its potential returns per unit of risk. Spot Coffee is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Spot Coffee on August 28, 2024 and sell it today you would lose (3.80) from holding Spot Coffee or give up 95.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marstons PLC vs. Spot Coffee
Performance |
| Timeline |
| Marstons PLC |
| Spot Coffee |
Marstons PLC and Spot Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marstons PLC and Spot Coffee
The main advantage of trading using opposite Marstons PLC and Spot Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marstons PLC 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 Marstons PLC 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.| Spot Coffee vs. FitLife Brands, Common | Spot Coffee vs. HUMANA INC | Spot Coffee vs. SCOR PK | Spot Coffee vs. Aquagold International |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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