Correlation Between TreeHouse Foods and Major Drilling
Can any of the company-specific risk be diversified away by investing in both TreeHouse Foods and Major Drilling 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 TreeHouse Foods and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TreeHouse Foods and Major Drilling Group, you can compare the effects of market volatilities on TreeHouse Foods and Major Drilling 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 TreeHouse Foods with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of TreeHouse Foods and Major Drilling.
Diversification Opportunities for TreeHouse Foods and Major Drilling
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between TreeHouse and Major is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding TreeHouse Foods and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and TreeHouse Foods 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 TreeHouse Foods are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of TreeHouse Foods i.e., TreeHouse Foods and Major Drilling go up and down completely randomly.
Pair Corralation between TreeHouse Foods and Major Drilling
Assuming the 90 days horizon TreeHouse Foods is expected to under-perform the Major Drilling. But the stock apears to be less risky and, when comparing its historical volatility, TreeHouse Foods is 1.12 times less risky than Major Drilling. The stock trades about -0.04 of its potential returns per unit of risk. The Major Drilling Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 620.00 in Major Drilling Group on August 28, 2024 and sell it today you would lose (40.00) from holding Major Drilling Group or give up 6.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TreeHouse Foods vs. Major Drilling Group
Performance |
| Timeline |
| TreeHouse Foods |
| Major Drilling Group |
TreeHouse Foods and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TreeHouse Foods and Major Drilling
The main advantage of trading using opposite TreeHouse Foods and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TreeHouse Foods position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.| TreeHouse Foods vs. Superior Plus Corp | TreeHouse Foods vs. NMI Holdings | TreeHouse Foods vs. Origin Agritech | TreeHouse Foods vs. SIVERS SEMICONDUCTORS AB |
| Major Drilling vs. Superior Plus Corp | Major Drilling vs. NMI Holdings | Major Drilling vs. Origin Agritech | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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