Correlation Between ETFS Coffee and STMicroelectronics

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

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

Diversification Opportunities for ETFS Coffee and STMicroelectronics

-0.84

Correlation Coefficient

ETFS Coffee  STMicroelectronics

Pay attention - limited upside

The 3 months correlation between ETFS and STMicroelectronics is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics and ETFS 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 ETFS Coffee ETC are associated (or correlated) with STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and STMicroelectronics go up and down completely randomly.

Pair Corralation between ETFS Coffee and STMicroelectronics

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 0.59 times more return on investment than STMicroelectronics. However, ETFS Coffee ETC is 1.68 times less risky than STMicroelectronics. It trades about -0.05 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.13 per unit of risk. If you would invest  4,679  in ETFS Coffee ETC on April 29, 2025 and sell it today you would lose (154.00) from holding ETFS Coffee ETC or give up 3.29% of portfolio value over 90 days.

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

ETFS Coffee ETC  vs.  STMicroelectronics NV

ETFS Coffee ETC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETFS Coffee ETC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

STMicroelectronics

Risk-Adjusted Performance

Modest

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

Pair Trading with ETFS Coffee and STMicroelectronics

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

The idea behind ETFS Coffee ETC and STMicroelectronics NV 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 Transaction History module to view history of all your transactions and understand their impact on performance.