Correlation Between Coffee Holding and BG Foods
Can any of the company-specific risk be diversified away by investing in both Coffee Holding and BG Foods 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 Coffee Holding and BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coffee Holding Co and BG Foods, you can compare the effects of market volatilities on Coffee Holding and BG Foods 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 Coffee Holding with a short position of BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coffee Holding and BG Foods.
Diversification Opportunities for Coffee Holding and BG Foods
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Coffee and BGS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Coffee Holding Co and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Coffee Holding 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 Coffee Holding Co are associated (or correlated) with BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Coffee Holding i.e., Coffee Holding and BG Foods go up and down completely randomly.
Pair Corralation between Coffee Holding and BG Foods
Considering the 90-day investment horizon Coffee Holding Co is expected to generate 4.03 times more return on investment than BG Foods. However, Coffee Holding is 4.03 times more volatile than BG Foods. It trades about 0.07 of its potential returns per unit of risk. BG Foods is currently generating about -0.06 per unit of risk. If you would invest 159.00 in Coffee Holding Co on January 30, 2024 and sell it today you would earn a total of 8.00 from holding Coffee Holding Co or generate 5.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Coffee Holding Co vs. BG Foods
Performance |
Timeline |
Coffee Holding |
BG Foods |
Coffee Holding and BG Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coffee Holding and BG Foods
The main advantage of trading using opposite Coffee Holding and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coffee Holding position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.Coffee Holding vs. Seneca Foods Corp | Coffee Holding vs. Seneca Foods Corp | Coffee Holding vs. Natures Sunshine Products | Coffee Holding vs. J J Snack |
Check out your portfolio center.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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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