Correlation Between General Mills and TreeHouse Foods
Can any of the company-specific risk be diversified away by investing in both General Mills 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 General Mills and TreeHouse Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Mills and TreeHouse Foods, you can compare the effects of market volatilities on General Mills 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 General Mills with a short position of TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and TreeHouse Foods.
Diversification Opportunities for General Mills and TreeHouse Foods
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between General and TreeHouse is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods and General Mills 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 General Mills 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 General Mills i.e., General Mills and TreeHouse Foods go up and down completely randomly.
Pair Corralation between General Mills and TreeHouse Foods
Assuming the 90 days horizon General Mills is expected to generate 0.33 times more return on investment than TreeHouse Foods. However, General Mills is 3.06 times less risky than TreeHouse Foods. It trades about 0.02 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.02 per unit of risk. If you would invest 6,278 in General Mills on August 31, 2024 and sell it today you would earn a total of 32.00 from holding General Mills or generate 0.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
General Mills vs. TreeHouse Foods
Performance |
| Timeline |
| General Mills |
| TreeHouse Foods |
General Mills and TreeHouse Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General Mills and TreeHouse Foods
The main advantage of trading using opposite General Mills and TreeHouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills 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.| General Mills vs. Danone SA | General Mills vs. Superior Plus Corp | General Mills vs. NMI Holdings | General Mills vs. Origin Agritech |
| TreeHouse Foods vs. Danone SA | TreeHouse Foods vs. Superior Plus Corp | TreeHouse Foods vs. NMI Holdings | TreeHouse Foods vs. Origin Agritech |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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