Correlation Between Coffee Holding and General Mills

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

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

Diversification Opportunities for Coffee Holding and General Mills

-0.44

Correlation Coefficient

Coffee Holding  General Mills

Very good diversification

The 3 months correlation between Coffee and General is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills and Coffee Holding 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 Coffee Holding Co are associated (or correlated) with General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Coffee Holding i.e., Coffee Holding and General Mills go up and down completely randomly.

Pair Corralation between Coffee Holding and General Mills

Considering the 90-day investment horizon Coffee Holding Co is expected to generate 6.73 times more return on investment than General Mills. However, Coffee Holding is 6.73 times more volatile than General Mills. It trades about 0.19 of its potential returns per unit of risk. General Mills is currently generating about -0.13 per unit of risk. If you would invest  209.00  in Coffee Holding Co on September 3, 2024 and sell it today you would earn a total of  198.00  from holding Coffee Holding Co or generate 94.74% return on investment over 90 days.

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

Coffee Holding Co  vs.  General Mills

Coffee Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coffee Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Coffee Holding and General Mills

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

The idea behind Coffee Holding Co and General Mills 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.