Correlation Between Westrock Coffee and Worthington Steel

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

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

Diversification Opportunities for Westrock Coffee and Worthington Steel

0.29

Correlation Coefficient

Westrock Coffee  Worthington Steel

Modest diversification

The 3 months correlation between Westrock and Worthington is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Westrock Coffee i.e., Westrock Coffee and Worthington Steel go up and down completely randomly.

Pair Corralation between Westrock Coffee and Worthington Steel

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Worthington Steel. In addition to that, Westrock Coffee is 1.13 times more volatile than Worthington Steel. It trades about -0.01 of its total potential returns per unit of risk. Worthington Steel is currently generating about 0.18 per unit of volatility. If you would invest  3,166  in Worthington Steel on September 5, 2024 and sell it today you would earn a total of  1,305  from holding Worthington Steel or generate 41.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Westrock Coffee  vs.  Worthington Steel

Westrock Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Worthington Steel

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Worthington Steel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Worthington Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Westrock Coffee and Worthington Steel

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

The idea behind Westrock Coffee and Worthington Steel 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.