Correlation Between Lamb Weston and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Lamb Weston and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on Lamb Weston and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and MGP Ingredients.
Diversification Opportunities for Lamb Weston and MGP Ingredients
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lamb and MGP is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Lamb Weston i.e., Lamb Weston and MGP Ingredients go up and down completely randomly.
Pair Corralation between Lamb Weston and MGP Ingredients
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 0.91 times more return on investment than MGP Ingredients. However, Lamb Weston Holdings is 1.1 times less risky than MGP Ingredients. It trades about 0.0 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.06 per unit of risk. If you would invest 8,376 in Lamb Weston Holdings on August 27, 2024 and sell it today you would lose (684.00) from holding Lamb Weston Holdings or give up 8.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. MGP Ingredients
Performance |
| Timeline |
| Lamb Weston Holdings |
| MGP Ingredients |
Lamb Weston and MGP Ingredients Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and MGP Ingredients
The main advantage of trading using opposite Lamb Weston and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
| MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Diageo PLC ADR | MGP Ingredients vs. Brown Forman | MGP Ingredients vs. Constellation Brands Class |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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