Correlation Between NYSE Composite and Spot Coffee
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Spot Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Spot Coffee, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Spot Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Spot Coffee.
Diversification Opportunities for NYSE Composite and Spot Coffee
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and Spot is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Spot Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spot Coffee and NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Spot Coffee go up and down completely randomly.
Pair Corralation between NYSE Composite and Spot Coffee
Assuming the 90 days trading horizon NYSE Composite is expected to generate 45.7 times less return on investment than Spot Coffee. But when comparing it to its historical volatility, NYSE Composite is 99.25 times less risky than Spot Coffee. It trades about 0.24 of its potential returns per unit of risk. Spot Coffee is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 0.69 in Spot Coffee on August 28, 2024 and sell it today you would lose (0.49) from holding Spot Coffee or give up 71.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Spot Coffee
Performance |
| Timeline |
NYSE Composite and Spot Coffee Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Spot Coffee
Pair trading matchups for Spot Coffee
Pair Trading with NYSE Composite and Spot Coffee
The main advantage of trading using opposite NYSE Composite and Spot Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |