Correlation Between Alsea SAB and Spot Coffee

Can any of the company-specific risk be diversified away by investing in both Alsea SAB 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 Alsea SAB and Spot Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alsea SAB de and Spot Coffee, you can compare the effects of market volatilities on Alsea SAB 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 Alsea SAB with a short position of Spot Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alsea SAB and Spot Coffee.

Diversification Opportunities for Alsea SAB and Spot Coffee

0.37

Correlation Coefficient

Alsea SAB  Spot Coffee

Weak diversification

The 3 months correlation between Alsea and Spot is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alsea SAB de and Spot Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spot Coffee and Alsea SAB 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 Alsea SAB de 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 Alsea SAB i.e., Alsea SAB and Spot Coffee go up and down completely randomly.

Pair Corralation between Alsea SAB and Spot Coffee

Assuming the 90 days horizon Alsea SAB de is expected to under-perform the Spot Coffee. But the pink sheet apears to be less risky and, when comparing its historical volatility, Alsea SAB de is 14.62 times less risky than Spot Coffee. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Spot Coffee is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Spot Coffee on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Spot Coffee or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alsea SAB de  vs.  Spot Coffee

Alsea SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alsea SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Spot Coffee

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Spot Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alsea SAB and Spot Coffee

The main advantage of trading using opposite Alsea SAB and Spot Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alsea SAB 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.

The idea behind Alsea SAB de and Spot Coffee pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.