Correlation Between Flow Beverage and Vita Coco

Can any of the company-specific risk be diversified away by investing in both Flow Beverage and Vita Coco 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 Flow Beverage and Vita Coco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flow Beverage Corp and Vita Coco, you can compare the effects of market volatilities on Flow Beverage and Vita Coco 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 Flow Beverage with a short position of Vita Coco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flow Beverage and Vita Coco.

Diversification Opportunities for Flow Beverage and Vita Coco

-0.69

Correlation Coefficient

Flow Beverage  Vita Coco

Excellent diversification

The 3 months correlation between Flow and Vita is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Flow Beverage Corp and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco and Flow Beverage 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 Flow Beverage Corp are associated (or correlated) with Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of Flow Beverage i.e., Flow Beverage and Vita Coco go up and down completely randomly.

Pair Corralation between Flow Beverage and Vita Coco

Assuming the 90 days horizon Flow Beverage Corp is expected to under-perform the Vita Coco. In addition to that, Flow Beverage is 2.14 times more volatile than Vita Coco. It trades about -0.13 of its total potential returns per unit of risk. Vita Coco is currently generating about 0.24 per unit of volatility. If you would invest  2,854  in Vita Coco on September 4, 2024 and sell it today you would earn a total of  721.00  from holding Vita Coco or generate 25.26% return on investment over 90 days.

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

Flow Beverage Corp  vs.  Vita Coco

Flow Beverage Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flow Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Vita Coco

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flow Beverage and Vita Coco

The main advantage of trading using opposite Flow Beverage and Vita Coco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flow Beverage position performs unexpectedly, Vita Coco 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 Vita Coco will offset losses from the drop in Vita Coco's long position.

The idea behind Flow Beverage Corp and Vita Coco 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.