Correlation Between Lancaster Colony and Associated British
Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and Associated British 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 Lancaster Colony and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancaster Colony and Associated British Foods, you can compare the effects of market volatilities on Lancaster Colony and Associated British 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 Lancaster Colony with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Associated British.
Diversification Opportunities for Lancaster Colony and Associated British
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lancaster and Associated is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Associated British go up and down completely randomly.
Pair Corralation between Lancaster Colony and Associated British
Given the investment horizon of 90 days Lancaster Colony is expected to generate 0.91 times more return on investment than Associated British. However, Lancaster Colony is 1.1 times less risky than Associated British. It trades about -0.08 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.23 per unit of risk. If you would invest 17,255 in Lancaster Colony on November 2, 2024 and sell it today you would lose (413.50) from holding Lancaster Colony or give up 2.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Lancaster Colony vs. Associated British Foods
Performance |
| Timeline |
| Lancaster Colony |
| Associated British Foods |
Lancaster Colony and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lancaster Colony and Associated British
The main advantage of trading using opposite Lancaster Colony and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Lancaster Colony vs. Treehouse Foods | Lancaster Colony vs. John B Sanfilippo | Lancaster Colony vs. Seneca Foods Corp | Lancaster Colony vs. J J Snack |
| Associated British vs. Darling Ingredients | Associated British vs. JM Smucker | Associated British vs. McCormick Company Incorporated | Associated British vs. Campbell Soup |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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