Correlation Between ETFS Coffee and Boston Beer
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee and Boston Beer 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 Boston Beer 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 The Boston Beer, you can compare the effects of market volatilities on ETFS Coffee and Boston Beer 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 Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and Boston Beer.
Diversification Opportunities for ETFS Coffee and Boston Beer
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and Boston is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and The Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and Boston Beer go up and down completely randomly.
Pair Corralation between ETFS Coffee and Boston Beer
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 20.12 times more return on investment than Boston Beer. However, ETFS Coffee is 20.12 times more volatile than The Boston Beer. It trades about 0.05 of its potential returns per unit of risk. The Boston Beer is currently generating about 0.0 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 4,835 from holding ETFS Coffee ETC or generate 5143.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.81% |
| Values | Daily Returns |
ETFS Coffee ETC vs. The Boston Beer
Performance |
| Timeline |
| ETFS Coffee ETC |
| Boston Beer |
ETFS Coffee and Boston Beer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and Boston Beer
The main advantage of trading using opposite ETFS Coffee and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| Boston Beer vs. Jacquet Metal Service | Boston Beer vs. CVS Health | Boston Beer vs. Diamondrock Hospitality Co | Boston Beer vs. Bumrungrad Hospital Public |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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