Correlation Between Lion Biotechnologies and TreeHouse Foods
Can any of the company-specific risk be diversified away by investing in both Lion Biotechnologies and TreeHouse 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 Lion Biotechnologies and TreeHouse Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Biotechnologies and TreeHouse Foods, you can compare the effects of market volatilities on Lion Biotechnologies and TreeHouse 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 Lion Biotechnologies with a short position of TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Biotechnologies and TreeHouse Foods.
Diversification Opportunities for Lion Biotechnologies and TreeHouse Foods
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lion and TreeHouse is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods and Lion Biotechnologies 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 Lion Biotechnologies are associated (or correlated) with TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of Lion Biotechnologies i.e., Lion Biotechnologies and TreeHouse Foods go up and down completely randomly.
Pair Corralation between Lion Biotechnologies and TreeHouse Foods
Assuming the 90 days trading horizon Lion Biotechnologies is expected to generate 2.88 times more return on investment than TreeHouse Foods. However, Lion Biotechnologies is 2.88 times more volatile than TreeHouse Foods. It trades about 0.04 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.03 per unit of risk. If you would invest 735.00 in Lion Biotechnologies on September 1, 2024 and sell it today you would earn a total of 165.00 from holding Lion Biotechnologies or generate 22.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Biotechnologies vs. TreeHouse Foods
Performance |
| Timeline |
| Lion Biotechnologies |
| TreeHouse Foods |
Lion Biotechnologies and TreeHouse Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Biotechnologies and TreeHouse Foods
The main advantage of trading using opposite Lion Biotechnologies and TreeHouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Biotechnologies position performs unexpectedly, TreeHouse 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 TreeHouse Foods will offset losses from the drop in TreeHouse Foods' long position.| Lion Biotechnologies vs. NIPPON STEEL SPADR | Lion Biotechnologies vs. Cleanaway Waste Management | Lion Biotechnologies vs. Pembina Pipeline Corp | Lion Biotechnologies vs. CosmoSteel Holdings Limited |
| TreeHouse Foods vs. LEGACY IRON ORE | TreeHouse Foods vs. Reliance Steel Aluminum | TreeHouse Foods vs. Caltagirone SpA | TreeHouse Foods vs. REGAL ASIAN INVESTMENTS |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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