Correlation Between Lamb Weston and Central Garden
Can any of the company-specific risk be diversified away by investing in both Lamb Weston 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 Lamb Weston and Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamb Weston Holdings and Central Garden Pet, you can compare the effects of market volatilities on Lamb Weston 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 Lamb Weston with a short position of Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Central Garden.
Diversification Opportunities for Lamb Weston and Central Garden
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lamb and Central is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings 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 Lamb Weston 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 Lamb Weston Holdings 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 Lamb Weston i.e., Lamb Weston and Central Garden go up and down completely randomly.
Pair Corralation between Lamb Weston and Central Garden
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to under-perform the Central Garden. In addition to that, Lamb Weston is 1.3 times more volatile than Central Garden Pet. It trades about -0.02 of its total potential returns per unit of risk. Central Garden Pet is currently generating about 0.0 per unit of volatility. If you would invest 3,283 in Central Garden Pet on November 2, 2024 and sell it today you would lose (174.00) from holding Central Garden Pet or give up 5.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. Central Garden Pet
Performance |
| Timeline |
| Lamb Weston Holdings |
| Central Garden Pet |
Lamb Weston and Central Garden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and Central Garden
The main advantage of trading using opposite Lamb Weston and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston 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.| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
| Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack | Central Garden vs. Central Garden Pet |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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