Correlation Between Westrock Coffee and Empresa Distribuidora

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

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

Diversification Opportunities for Westrock Coffee and Empresa Distribuidora

0.59

Correlation Coefficient

Westrock Coffee  Empresa Distribuidora

Very weak diversification

The 3 months correlation between Westrock and Empresa is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora and Westrock 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 Westrock Coffee are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Westrock Coffee and Empresa Distribuidora

Given the investment horizon of 90 days Westrock Coffee is expected to generate 8.1 times less return on investment than Empresa Distribuidora. In addition to that, Westrock Coffee is 1.12 times more volatile than Empresa Distribuidora y. It trades about 0.06 of its total potential returns per unit of risk. Empresa Distribuidora y is currently generating about 0.51 per unit of volatility. If you would invest  3,476  in Empresa Distribuidora y on September 15, 2024 and sell it today you would earn a total of  1,447  from holding Empresa Distribuidora y or generate 41.63% return on investment over 90 days.

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

Westrock Coffee  vs.  Empresa Distribuidora y

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.

Empresa Distribuidora

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westrock Coffee and Empresa Distribuidora

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

The idea behind Westrock Coffee and Empresa Distribuidora y 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.