Correlation Between ETFS Coffee and PHN Frankfurt
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee and PHN Frankfurt 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 PHN Frankfurt 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 PHN Frankfurt, you can compare the effects of market volatilities on ETFS Coffee and PHN Frankfurt 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 PHN Frankfurt. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and PHN Frankfurt.
Diversification Opportunities for ETFS Coffee and PHN Frankfurt
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ETFS and PHN is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and PHN Frankfurt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHN Frankfurt 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 PHN Frankfurt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHN Frankfurt has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and PHN Frankfurt go up and down completely randomly.
Pair Corralation between ETFS Coffee and PHN Frankfurt
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 1.73 times more return on investment than PHN Frankfurt. However, ETFS Coffee is 1.73 times more volatile than PHN Frankfurt. It trades about 0.38 of its potential returns per unit of risk. PHN Frankfurt is currently generating about 0.01 per unit of risk. If you would invest 3,987 in ETFS Coffee ETC on September 12, 2024 and sell it today you would earn a total of 1,067 from holding ETFS Coffee ETC or generate 26.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 86.96% |
| Values | Daily Returns |
ETFS Coffee ETC vs. PHN Frankfurt
Performance |
| Timeline |
| ETFS Coffee ETC |
| PHN Frankfurt |
ETFS Coffee and PHN Frankfurt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and PHN Frankfurt
The main advantage of trading using opposite ETFS Coffee and PHN Frankfurt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee position performs unexpectedly, PHN Frankfurt 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 PHN Frankfurt will offset losses from the drop in PHN Frankfurt's long position.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| PHN Frankfurt vs. Westinghouse Air Brake | PHN Frankfurt vs. JIAHUA STORES | PHN Frankfurt vs. Alaska Air Group | PHN Frankfurt vs. ETFS Coffee ETC |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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