Small-Cap Corner: A Coffee Correlation Conundrum? (JVA, GMCR)

The woes of controversial coffee firm Green Mountain Coffee Roasters

have been well documented. Such is life for a company that has been burned by its own accounting issues, missed forecasts and

. Given the size of Starbucks

and the infamy of Green Mountain, it's not surprising these two names command most of the attention when it comes to coffee stocks, but they're far from being the only beans on the block. Those looking for a micro-cap play on the world's coffee addiction might want to consider highly volatile Coffee Holding Co.

. New York-based Coffee Holding engages in manufacturing, roasting, packaging, marketing, and distributing roasted and blended coffees. While the Green Mountain situation has been bad news for other coffee stocks, Coffee Holding has clearly held up better than its larger, more controversial peer. Year-to-date, Coffee Holding is only slightly negative. In the past 90 days, the shares are off 5.1%, but that compares quite favorably to a 65% plunge for Green Mountain. Part of the rub with Coffee Holding is that it has all the volatility one might expect with a micro-cap and then some. A beta of nearly 2.4 is almost double that of Starbucks'. Add to that, Coffee Holding has traded in range of $6.50-$30.66 over the past 52 weeks. Today, the shares reside below $8. Coffee Holding is a momentum stock and the primary issues surrounding that momentum are momentum and a short interest that is often alarmingly high. Margins would logically be crimped by rising coffee prices, something that wasn't believed to be much of an issue this year as Brazil was expected to churn out a record Arabica crop. Recent weather issues now put the Brazilian Arabica at risk for diminished size and it should be noted that robusta beans, produced by Vietnam among others, have seen a double-digit price increase this year. The iPath DJ-UBS Coffee TR Sub-Index ETN

has lost more than 30% this year, so make of the coffee price argument what you will, but that doesn't obfuscate the serious short pressure Coffee Holding is often subject to. Coffee Holding currently has a short ratio of 1.42 and a short interest north of 20%. Of course the good news is that if other coffee stocks move higher or prices for the commodity plunge, Coffee Holdings' shorts would be forced to cover and with a stock this volatile, that could lead to substantial gains in just a matter of days. Think it can't happen? Think again. Coffee Holding doubled in price in just a few days in March on a mix of good earnings news and subsequent short-covering. No this isn't Starbucks, but Coffee Holding might just be a safer bet at the moment than Green Mountain.