Correlation Between Spot Coffee and Grillit
Can any of the company-specific risk be diversified away by investing in both Spot Coffee and Grillit 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 Spot Coffee and Grillit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spot Coffee and Grillit, you can compare the effects of market volatilities on Spot Coffee and Grillit 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 Spot Coffee with a short position of Grillit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spot Coffee and Grillit.
Diversification Opportunities for Spot Coffee and Grillit
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Spot and Grillit is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Spot Coffee and Grillit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grillit and Spot 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 Spot Coffee are associated (or correlated) with Grillit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grillit has no effect on the direction of Spot Coffee i.e., Spot Coffee and Grillit go up and down completely randomly.
Pair Corralation between Spot Coffee and Grillit
Assuming the 90 days horizon Spot Coffee is expected to generate 1.66 times less return on investment than Grillit. But when comparing it to its historical volatility, Spot Coffee is 1.26 times less risky than Grillit. It trades about 0.09 of its potential returns per unit of risk. Grillit is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.04 in Grillit on August 28, 2024 and sell it today you would earn a total of 0.01 from holding Grillit or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spot Coffee vs. Grillit
Performance |
| Timeline |
| Spot Coffee |
| Grillit |
Spot Coffee and Grillit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spot Coffee and Grillit
The main advantage of trading using opposite Spot Coffee and Grillit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spot Coffee position performs unexpectedly, Grillit 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 Grillit will offset losses from the drop in Grillit's long position.| Spot Coffee vs. FitLife Brands, Common | Spot Coffee vs. HUMANA INC | Spot Coffee vs. SCOR PK | Spot Coffee vs. Aquagold International |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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