Correlation Between Lamb Weston and SW Seed
Can any of the company-specific risk be diversified away by investing in both Lamb Weston and SW Seed 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 SW Seed 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 SW Seed Company, you can compare the effects of market volatilities on Lamb Weston and SW Seed 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 SW Seed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and SW Seed.
Diversification Opportunities for Lamb Weston and SW Seed
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lamb and SANW is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and SW Seed Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SW Seed Company 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 SW Seed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SW Seed Company has no effect on the direction of Lamb Weston i.e., Lamb Weston and SW Seed go up and down completely randomly.
Pair Corralation between Lamb Weston and SW Seed
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 0.37 times more return on investment than SW Seed. However, Lamb Weston Holdings is 2.67 times less risky than SW Seed. It trades about -0.03 of its potential returns per unit of risk. SW Seed Company is currently generating about -0.02 per unit of risk. If you would invest 11,154 in Lamb Weston Holdings on August 28, 2024 and sell it today you would lose (3,476) from holding Lamb Weston Holdings or give up 31.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. SW Seed Company
Performance |
| Timeline |
| Lamb Weston Holdings |
| SW Seed Company |
Lamb Weston and SW Seed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and SW Seed
The main advantage of trading using opposite Lamb Weston and SW Seed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston position performs unexpectedly, SW Seed 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 SW Seed will offset losses from the drop in SW Seed's long position.| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
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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