Correlation Between Associated British and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both Associated British and Lamb Weston 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 Associated British and Lamb Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Lamb Weston Holdings, you can compare the effects of market volatilities on Associated British and Lamb Weston 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 Associated British with a short position of Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Lamb Weston.
Diversification Opportunities for Associated British and Lamb Weston
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Associated and Lamb is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings and Associated British 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 Associated British Foods are associated (or correlated) with Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Associated British i.e., Associated British and Lamb Weston go up and down completely randomly.
Pair Corralation between Associated British and Lamb Weston
Assuming the 90 days horizon Associated British Foods is expected to under-perform the Lamb Weston. But the pink sheet apears to be less risky and, when comparing its historical volatility, Associated British Foods is 1.91 times less risky than Lamb Weston. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Lamb Weston Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 8,642 in Lamb Weston Holdings on August 30, 2024 and sell it today you would lose (971.00) from holding Lamb Weston Holdings or give up 11.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Lamb Weston Holdings
Performance |
| Timeline |
| Associated British Foods |
| Lamb Weston Holdings |
Associated British and Lamb Weston Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Lamb Weston
The main advantage of trading using opposite Associated British and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Lamb Weston 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 Lamb Weston will offset losses from the drop in Lamb Weston's long position.| Associated British vs. Artisan Consumer Goods | Associated British vs. Altavoz Entertainment | Associated British vs. Avi Ltd ADR | Associated British vs. The a2 Milk |
| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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