Correlation Between Associated British and Post Holdings
Can any of the company-specific risk be diversified away by investing in both Associated British and Post Holdings 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 Post Holdings 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 Post Holdings, you can compare the effects of market volatilities on Associated British and Post Holdings 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 Post Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Post Holdings.
Diversification Opportunities for Associated British and Post Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Associated and Post is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post 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 Post Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post Holdings has no effect on the direction of Associated British i.e., Associated British and Post Holdings go up and down completely randomly.
Pair Corralation between Associated British and Post Holdings
Assuming the 90 days horizon Associated British is expected to generate 2.9 times less return on investment than Post Holdings. But when comparing it to its historical volatility, Associated British Foods is 1.14 times less risky than Post Holdings. It trades about 0.05 of its potential returns per unit of risk. Post Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 10,893 in Post Holdings on November 28, 2024 and sell it today you would earn a total of 478.50 from holding Post Holdings or generate 4.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Associated British Foods vs. Post Holdings
Performance |
| Timeline |
| Associated British Foods |
| Post Holdings |
Associated British and Post Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Post Holdings
The main advantage of trading using opposite Associated British and Post Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Post Holdings 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 Post Holdings will offset losses from the drop in Post Holdings' 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 |
| Post Holdings vs. Simply Good Foods | Post Holdings vs. Treehouse Foods | Post Holdings vs. J J Snack | Post Holdings vs. Central Garden Pet |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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