Correlation Between ETFS Coffee and Middle Island
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee and Middle Island 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 Middle Island 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 Middle Island Resources, you can compare the effects of market volatilities on ETFS Coffee and Middle Island 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 Middle Island. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and Middle Island.
Diversification Opportunities for ETFS Coffee and Middle Island
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between ETFS and Middle is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and Middle Island Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middle Island Resources 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 Middle Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middle Island Resources has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and Middle Island go up and down completely randomly.
Pair Corralation between ETFS Coffee and Middle Island
Assuming the 90 days trading horizon ETFS Coffee is expected to generate 1.83 times less return on investment than Middle Island. But when comparing it to its historical volatility, ETFS Coffee ETC is 4.52 times less risky than Middle Island. It trades about 0.25 of its potential returns per unit of risk. Middle Island Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.35 in Middle Island Resources on September 13, 2024 and sell it today you would earn a total of 0.15 from holding Middle Island Resources or generate 42.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.88% |
| Values | Daily Returns |
ETFS Coffee ETC vs. Middle Island Resources
Performance |
| Timeline |
| ETFS Coffee ETC |
| Middle Island Resources |
ETFS Coffee and Middle Island Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and Middle Island
The main advantage of trading using opposite ETFS Coffee and Middle Island positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee position performs unexpectedly, Middle Island 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 Middle Island will offset losses from the drop in Middle Island's long position.| ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc | ETFS Coffee vs. Apple Inc |
| Middle Island vs. NetSol Technologies | Middle Island vs. ETFS Coffee ETC | Middle Island vs. IMPERIAL TOBACCO | Middle Island vs. ORMAT TECHNOLOGIES |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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