Correlation Between ETFS Coffee and National Beverage
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee and National Beverage 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 ETFS Coffee and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Coffee ETC and National Beverage Corp, you can compare the effects of market volatilities on ETFS Coffee and National Beverage 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 ETFS Coffee with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and National Beverage.
Diversification Opportunities for ETFS Coffee and National Beverage
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and National is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and ETFS Coffee 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 ETFS Coffee ETC are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and National Beverage go up and down completely randomly.
Pair Corralation between ETFS Coffee and National Beverage
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 23.73 times more return on investment than National Beverage. However, ETFS Coffee is 23.73 times more volatile than National Beverage Corp. It trades about 0.05 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.03 per unit of risk. If you would invest 94.00 in ETFS Coffee ETC on August 28, 2024 and sell it today you would earn a total of 4,821 from holding ETFS Coffee ETC or generate 5128.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.96% |
| Values | Daily Returns |
ETFS Coffee ETC vs. National Beverage Corp
Performance |
| Timeline |
| ETFS Coffee ETC |
| National Beverage Corp |
ETFS Coffee and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and National Beverage
The main advantage of trading using opposite ETFS Coffee and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| National Beverage vs. CEOTRONICS | National Beverage vs. Platinum Investment Management | National Beverage vs. Perdoceo Education | National Beverage vs. ANTA SPORTS PRODUCT |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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