Correlation Between ETFS Coffee and KINGBOARD CHEMICAL

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

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

Diversification Opportunities for ETFS Coffee and KINGBOARD CHEMICAL

0.45

Correlation Coefficient

ETFS Coffee  KINGBOARD CHEMICAL

Very weak diversification

The 3 months correlation between ETFS and KINGBOARD is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and KINGBOARD CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINGBOARD CHEMICAL and ETFS 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 ETFS Coffee ETC are associated (or correlated) with KINGBOARD CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINGBOARD CHEMICAL has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and KINGBOARD CHEMICAL go up and down completely randomly.

Pair Corralation between ETFS Coffee and KINGBOARD CHEMICAL

Assuming the 90 days trading horizon ETFS Coffee is expected to generate 2.4 times less return on investment than KINGBOARD CHEMICAL. But when comparing it to its historical volatility, ETFS Coffee ETC is 1.5 times less risky than KINGBOARD CHEMICAL. It trades about 0.12 of its potential returns per unit of risk. KINGBOARD CHEMICAL is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  188.00  in KINGBOARD CHEMICAL on September 25, 2024 and sell it today you would earn a total of  36.00  from holding KINGBOARD CHEMICAL or generate 19.15% return on investment over 90 days.

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

ETFS Coffee ETC  vs.  KINGBOARD CHEMICAL

ETFS Coffee ETC

Risk-Adjusted Performance

14 of 100

Good

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

KINGBOARD CHEMICAL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KINGBOARD CHEMICAL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, KINGBOARD CHEMICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ETFS Coffee and KINGBOARD CHEMICAL

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

The idea behind ETFS Coffee ETC and KINGBOARD CHEMICAL 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.