Correlation Between ETFS Coffee and North American
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on ETFS Coffee and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and North American.
Diversification Opportunities for ETFS Coffee and North American
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ETFS and North is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and North American go up and down completely randomly.
Pair Corralation between ETFS Coffee and North American
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 0.94 times more return on investment than North American. However, ETFS Coffee ETC is 1.06 times less risky than North American. It trades about 0.29 of its potential returns per unit of risk. North American Construction is currently generating about -0.21 per unit of risk. If you would invest 5,250 in ETFS Coffee ETC on November 5, 2024 and sell it today you would earn a total of 738.00 from holding ETFS Coffee ETC or generate 14.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
ETFS Coffee ETC vs. North American Construction
Performance |
| Timeline |
| ETFS Coffee ETC |
| North American Const |
ETFS Coffee and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and North American
The main advantage of trading using opposite ETFS Coffee and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| ETFS Coffee vs. Molson Coors Beverage | ETFS Coffee vs. ARDAGH METAL PACDL 0001 | ETFS Coffee vs. Transport International Holdings | ETFS Coffee vs. GREENX METALS LTD |
| North American vs. ARDAGH METAL PACDL 0001 | North American vs. East Africa Metals | North American vs. MCEWEN MINING INC | North American vs. Ringmetall SE |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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