Correlation Between Trupanion and Westrock Coffee

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

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

Diversification Opportunities for Trupanion and Westrock Coffee

0.08

Correlation Coefficient

Trupanion  Westrock Coffee

Significant diversification

The 3 months correlation between Trupanion and Westrock is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Trupanion and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee and Trupanion 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 Trupanion are associated (or correlated) with Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Trupanion i.e., Trupanion and Westrock Coffee go up and down completely randomly.

Pair Corralation between Trupanion and Westrock Coffee

Given the investment horizon of 90 days Trupanion is expected to generate 0.79 times more return on investment than Westrock Coffee. However, Trupanion is 1.26 times less risky than Westrock Coffee. It trades about 0.13 of its potential returns per unit of risk. Westrock Coffee is currently generating about 0.03 per unit of risk. If you would invest  4,339  in Trupanion on September 2, 2024 and sell it today you would earn a total of  992.00  from holding Trupanion or generate 22.86% return on investment over 90 days.

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

Trupanion  vs.  Westrock Coffee

Trupanion

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Westrock Coffee

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Westrock Coffee may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Trupanion and Westrock Coffee

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

The idea behind Trupanion and Westrock 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..