Correlation Between Dairy Farm and TreeHouse Foods
Can any of the company-specific risk be diversified away by investing in both Dairy Farm and TreeHouse Foods 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 Dairy Farm and TreeHouse Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and TreeHouse Foods, you can compare the effects of market volatilities on Dairy Farm and TreeHouse Foods 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 Dairy Farm with a short position of TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and TreeHouse Foods.
Diversification Opportunities for Dairy Farm and TreeHouse Foods
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Dairy and TreeHouse is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods and Dairy Farm 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 Dairy Farm International are associated (or correlated) with TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of Dairy Farm i.e., Dairy Farm and TreeHouse Foods go up and down completely randomly.
Pair Corralation between Dairy Farm and TreeHouse Foods
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.17 times more return on investment than TreeHouse Foods. However, Dairy Farm is 1.17 times more volatile than TreeHouse Foods. It trades about 0.01 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.03 per unit of risk. If you would invest 243.00 in Dairy Farm International on September 1, 2024 and sell it today you would lose (13.00) from holding Dairy Farm International or give up 5.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. TreeHouse Foods
Performance |
| Timeline |
| Dairy Farm International |
| TreeHouse Foods |
Dairy Farm and TreeHouse Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and TreeHouse Foods
The main advantage of trading using opposite Dairy Farm and TreeHouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm position performs unexpectedly, TreeHouse Foods 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 TreeHouse Foods will offset losses from the drop in TreeHouse Foods' long position.| Dairy Farm vs. TESCO PLC LS 0633333 | Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. NMI Holdings | Dairy Farm vs. Origin Agritech |
| TreeHouse Foods vs. LEGACY IRON ORE | TreeHouse Foods vs. Reliance Steel Aluminum | TreeHouse Foods vs. Caltagirone SpA | TreeHouse Foods vs. REGAL ASIAN INVESTMENTS |
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 Stocks Directory module to find actively traded stocks across global markets.
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