Correlation Between Lancaster Colony and BG Foods
Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and BG Foods 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 BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancaster Colony and BG Foods, you can compare the effects of market volatilities on Lancaster Colony and BG Foods 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 BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and BG Foods.
Diversification Opportunities for Lancaster Colony and BG Foods
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lancaster and BGS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and BG Foods go up and down completely randomly.
Pair Corralation between Lancaster Colony and BG Foods
Given the investment horizon of 90 days Lancaster Colony is expected to generate 1.95 times less return on investment than BG Foods. But when comparing it to its historical volatility, Lancaster Colony is 1.83 times less risky than BG Foods. It trades about 0.06 of its potential returns per unit of risk. BG Foods is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 978.00 in BG Foods on January 24, 2024 and sell it today you would earn a total of 98.00 from holding BG Foods or generate 10.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lancaster Colony vs. BG Foods
Performance |
| Timeline |
| Lancaster Colony |
| BG Foods |
Lancaster Colony and BG Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lancaster Colony and BG Foods
The main advantage of trading using opposite Lancaster Colony and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.| Lancaster Colony vs. Bunge Limited | Lancaster Colony vs. Archer Daniels Midland | Lancaster Colony vs. Fresh Del Monte | Lancaster Colony vs. Limoneira Co |
| BG Foods vs. Bunge Limited | BG Foods vs. Archer Daniels Midland | BG Foods vs. Fresh Del Monte | BG Foods vs. Limoneira Co |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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