Correlation Between Lancaster Colony and Campbell Soup
Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and Campbell Soup 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 Campbell Soup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancaster Colony and Campbell Soup, you can compare the effects of market volatilities on Lancaster Colony and Campbell Soup 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 Campbell Soup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Campbell Soup.
Diversification Opportunities for Lancaster Colony and Campbell Soup
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lancaster and Campbell is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup 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 Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Campbell Soup go up and down completely randomly.
Pair Corralation between Lancaster Colony and Campbell Soup
Given the investment horizon of 90 days Lancaster Colony is expected to generate 4.89 times less return on investment than Campbell Soup. In addition to that, Lancaster Colony is 1.1 times more volatile than Campbell Soup. It trades about 0.07 of its total potential returns per unit of risk. Campbell Soup is currently generating about 0.36 per unit of volatility. If you would invest 4,269 in Campbell Soup on February 13, 2024 and sell it today you would earn a total of 326.00 from holding Campbell Soup or generate 7.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lancaster Colony vs. Campbell Soup
Performance |
| Timeline |
| Lancaster Colony |
| Campbell Soup |
Lancaster Colony and Campbell Soup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lancaster Colony and Campbell Soup
The main advantage of trading using opposite Lancaster Colony and Campbell Soup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony position performs unexpectedly, Campbell Soup 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 Campbell Soup will offset losses from the drop in Campbell Soup's long position.The idea behind Lancaster Colony and Campbell Soup pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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