Correlation Between Pace Metals and SPoT Coffee
Can any of the company-specific risk be diversified away by investing in both Pace Metals and SPoT Coffee 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 Pace Metals and SPoT Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pace Metals and SPoT Coffee, you can compare the effects of market volatilities on Pace Metals and SPoT Coffee 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 Pace Metals with a short position of SPoT Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Metals and SPoT Coffee.
Diversification Opportunities for Pace Metals and SPoT Coffee
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Pace and SPoT is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Pace Metals and SPoT Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPoT Coffee and Pace Metals 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 Pace Metals are associated (or correlated) with SPoT Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPoT Coffee has no effect on the direction of Pace Metals i.e., Pace Metals and SPoT Coffee go up and down completely randomly.
Pair Corralation between Pace Metals and SPoT Coffee
Assuming the 90 days trading horizon Pace Metals is expected to generate 2.05 times more return on investment than SPoT Coffee. However, Pace Metals is 2.05 times more volatile than SPoT Coffee. It trades about 0.05 of its potential returns per unit of risk. SPoT Coffee is currently generating about 0.0 per unit of risk. If you would invest 225.00 in Pace Metals on November 5, 2024 and sell it today you would lose (209.00) from holding Pace Metals or give up 92.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Pace Metals vs. SPoT Coffee
Performance |
| Timeline |
| Pace Metals |
| SPoT Coffee |
Pace Metals and SPoT Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pace Metals and SPoT Coffee
The main advantage of trading using opposite Pace Metals and SPoT Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Metals position performs unexpectedly, SPoT Coffee 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 SPoT Coffee will offset losses from the drop in SPoT Coffee's long position.| Pace Metals vs. Newmont Goldcorp Corp | Pace Metals vs. Agnico Eagle Mines | Pace Metals vs. Barrick Gold Corp | Pace Metals vs. Wheaton Precious Metals |
| SPoT Coffee vs. Westshore Terminals Investment | SPoT Coffee vs. Maple Peak Investments | SPoT Coffee vs. Information Services | SPoT Coffee vs. Wilmington Capital Management |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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