Correlation Between Central Garden and CHS
Can any of the company-specific risk be diversified away by investing in both Central Garden and CHS 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 CHS 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 CHS Inc Pref, you can compare the effects of market volatilities on Central Garden and CHS 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 CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and CHS.
Diversification Opportunities for Central Garden and CHS
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Central and CHS is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and CHS Inc Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc Pref 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 CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc Pref has no effect on the direction of Central Garden i.e., Central Garden and CHS go up and down completely randomly.
Pair Corralation between Central Garden and CHS
Assuming the 90 days horizon Central Garden Pet is expected to generate 2.1 times more return on investment than CHS. However, Central Garden is 2.1 times more volatile than CHS Inc Pref. It trades about 0.41 of its potential returns per unit of risk. CHS Inc Pref is currently generating about -0.04 per unit of risk. If you would invest 2,968 in Central Garden Pet on September 2, 2024 and sell it today you would earn a total of 411.00 from holding Central Garden Pet or generate 13.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Garden Pet vs. CHS Inc Pref
Performance |
| Timeline |
| Central Garden Pet |
| CHS Inc Pref |
Central Garden and CHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Garden and CHS
The main advantage of trading using opposite Central Garden and CHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, CHS 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 CHS will offset losses from the drop in CHS's long position.| Central Garden vs. Seneca Foods Corp | Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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