Correlation Between Central Garden and John B
Can any of the company-specific risk be diversified away by investing in both Central Garden and John B 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 Central Garden and John B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Garden Pet and John B Sanfilippo, you can compare the effects of market volatilities on Central Garden and John B 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 Central Garden with a short position of John B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and John B.
Diversification Opportunities for Central Garden and John B
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Central and John is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and John B Sanfilippo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John B Sanfilippo and Central Garden 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 Central Garden Pet are associated (or correlated) with John B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John B Sanfilippo has no effect on the direction of Central Garden i.e., Central Garden and John B go up and down completely randomly.
Pair Corralation between Central Garden and John B
Given the investment horizon of 90 days Central Garden Pet is expected to generate 1.16 times more return on investment than John B. However, Central Garden is 1.16 times more volatile than John B Sanfilippo. It trades about 0.03 of its potential returns per unit of risk. John B Sanfilippo is currently generating about 0.02 per unit of risk. If you would invest 3,183 in Central Garden Pet on August 24, 2024 and sell it today you would earn a total of 687.00 from holding Central Garden Pet or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Garden Pet vs. John B Sanfilippo
Performance |
| Timeline |
| Central Garden Pet |
| John B Sanfilippo |
Central Garden and John B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Garden and John B
The main advantage of trading using opposite Central Garden and John B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, John B 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 John B will offset losses from the drop in John B's long position.| Central Garden vs. McCormick Company Incorporated | Central Garden vs. Natures Sunshine Products | Central Garden vs. Seneca Foods Corp | Central Garden vs. Central Garden Pet |
| John B vs. Bellring Brands LLC | John B vs. Treehouse Foods | John B vs. Ingredion Incorporated | John B vs. JM Smucker |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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