Correlation Between ETFS Coffee and Fortescue Metals

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

Diversification Opportunities for ETFS Coffee and Fortescue Metals

0.22

Correlation Coefficient

ETFS Coffee  Fortescue Metals

Modest diversification

The 3 months correlation between ETFS and Fortescue is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and Fortescue Metals go up and down completely randomly.

Pair Corralation between ETFS Coffee and Fortescue Metals

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to under-perform the Fortescue Metals. In addition to that, ETFS Coffee is 1.13 times more volatile than Fortescue Metals Group. It trades about -0.11 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.1 per unit of volatility. If you would invest  844.00  in Fortescue Metals Group on April 20, 2025 and sell it today you would earn a total of  96.00  from holding Fortescue Metals Group or generate 11.37% return on investment over 90 days.

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

ETFS Coffee ETC  vs.  Fortescue Metals Group

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 weak 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.

Fortescue Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortescue Metals Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortescue Metals may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ETFS Coffee and Fortescue Metals

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

The idea behind ETFS Coffee ETC and Fortescue Metals Group 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.