Correlation Between Clorox and Central Garden
Can any of the company-specific risk be diversified away by investing in both Clorox and Central Garden 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 Clorox and Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Clorox and Central Garden Pet, you can compare the effects of market volatilities on Clorox and Central Garden 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 Clorox with a short position of Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clorox and Central Garden.
Diversification Opportunities for Clorox and Central Garden
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Clorox and Central is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet and Clorox 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 The Clorox are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Clorox i.e., Clorox and Central Garden go up and down completely randomly.
Pair Corralation between Clorox and Central Garden
Considering the 90-day investment horizon The Clorox is expected to generate 0.69 times more return on investment than Central Garden. However, The Clorox is 1.46 times less risky than Central Garden. It trades about 0.2 of its potential returns per unit of risk. Central Garden Pet is currently generating about -0.07 per unit of risk. If you would invest 12,680 in The Clorox on August 24, 2024 and sell it today you would earn a total of 4,235 from holding The Clorox or generate 33.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Clorox vs. Central Garden Pet
Performance |
| Timeline |
| Clorox |
| Central Garden Pet |
Clorox and Central Garden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clorox and Central Garden
The main advantage of trading using opposite Clorox and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clorox position performs unexpectedly, Central Garden 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 Central Garden will offset losses from the drop in Central Garden's long position.| Clorox vs. Honest Company | Clorox vs. Hims Hers Health | Clorox vs. Kimberly Clark | Clorox vs. Colgate Palmolive |
| Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack | Central Garden vs. John B Sanfilippo |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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