Correlation Between Central Garden and Lancaster Colony
Can any of the company-specific risk be diversified away by investing in both Central Garden and Lancaster Colony 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 Lancaster Colony 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 Lancaster Colony, you can compare the effects of market volatilities on Central Garden and Lancaster Colony 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 Lancaster Colony. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Lancaster Colony.
Diversification Opportunities for Central Garden and Lancaster Colony
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Central and Lancaster is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony 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 Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of Central Garden i.e., Central Garden and Lancaster Colony go up and down completely randomly.
Pair Corralation between Central Garden and Lancaster Colony
Given the investment horizon of 90 days Central Garden Pet is expected to generate 0.6 times more return on investment than Lancaster Colony. However, Central Garden Pet is 1.67 times less risky than Lancaster Colony. It trades about 0.42 of its potential returns per unit of risk. Lancaster Colony is currently generating about 0.11 per unit of risk. If you would invest 3,370 in Central Garden Pet on August 24, 2024 and sell it today you would earn a total of 494.00 from holding Central Garden Pet or generate 14.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Garden Pet vs. Lancaster Colony
Performance |
| Timeline |
| Central Garden Pet |
| Lancaster Colony |
Central Garden and Lancaster Colony Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Garden and Lancaster Colony
The main advantage of trading using opposite Central Garden and Lancaster Colony positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, Lancaster Colony 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 Lancaster Colony will offset losses from the drop in Lancaster Colony'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 |
| Lancaster Colony vs. Bellring Brands LLC | Lancaster Colony vs. Treehouse Foods | Lancaster Colony vs. Ingredion Incorporated | Lancaster Colony 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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