Correlation Between Spot Coffee and Bagger Daves

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

By analyzing existing cross correlation between Spot Coffee and Bagger Daves Burger, you can compare the effects of market volatilities on Spot Coffee and Bagger Daves 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 Bagger Daves. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spot Coffee and Bagger Daves.

Diversification Opportunities for Spot Coffee and Bagger Daves

0.3

Correlation Coefficient

Spot Coffee  Bagger Daves

Weak diversification

The 3 months correlation between Spot and Bagger is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Spot Coffee and Bagger Daves Burger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bagger Daves Burger 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 Bagger Daves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bagger Daves Burger has no effect on the direction of Spot Coffee i.e., Spot Coffee and Bagger Daves go up and down completely randomly.

Pair Corralation between Spot Coffee and Bagger Daves

Assuming the 90 days horizon Spot Coffee is expected to generate 8.51 times more return on investment than Bagger Daves. However, Spot Coffee is 8.51 times more volatile than Bagger Daves Burger. It trades about 0.09 of its potential returns per unit of risk. Bagger Daves Burger is currently generating about 0.03 per unit of risk. If you would invest  4.50  in Spot Coffee on September 1, 2024 and sell it today you would lose (4.30) from holding Spot Coffee or give up 95.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Spot Coffee  vs.  Bagger Daves Burger

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.

Bagger Daves Burger

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bagger Daves Burger are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Bagger Daves sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spot Coffee and Bagger Daves

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

The idea behind Spot Coffee and Bagger Daves Burger 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.