Correlation Between Coffee Holding and CSL

Can any of the company-specific risk be diversified away by investing in both Coffee Holding and CSL 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 CSL 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 CSL LTD SPONADR, you can compare the effects of market volatilities on Coffee Holding and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coffee Holding and CSL.

Diversification Opportunities for Coffee Holding and CSL

0.08

Correlation Coefficient

Coffee Holding  CSL

Significant diversification

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

Pair Corralation between Coffee Holding and CSL

Assuming the 90 days horizon Coffee Holding Co is expected to generate 3.33 times more return on investment than CSL. However, Coffee Holding is 3.33 times more volatile than CSL LTD SPONADR. It trades about 0.07 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about 0.1 per unit of risk. If you would invest  314.00  in Coffee Holding Co on May 18, 2025 and sell it today you would earn a total of  46.00  from holding Coffee Holding Co or generate 14.65% return on investment over 90 days.

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

Coffee Holding Co  vs.  CSL LTD SPONADR

Coffee Holding

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Coffee Holding Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Coffee Holding reported solid returns over the last few months and may actually be approaching a breakup point.

CSL LTD SPONADR

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in CSL LTD SPONADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, CSL may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Coffee Holding and CSL

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

The idea behind Coffee Holding Co and CSL LTD SPONADR 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.