Correlation Between Central Garden and Shineco

Can any of the company-specific risk be diversified away by investing in both Central Garden and Shineco 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 Central Garden and Shineco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Central Garden Pet and Shineco, you can compare the effects of market volatilities on Central Garden and Shineco 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 Central Garden with a short position of Shineco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Shineco.

Diversification Opportunities for Central Garden and Shineco

-0.45

Correlation Coefficient

Central Garden  Shineco

Very good diversification

The 3 months correlation between Central and Shineco is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Shineco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shineco and Central Garden 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 Central Garden Pet are associated (or correlated) with Shineco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shineco has no effect on the direction of Central Garden i.e., Central Garden and Shineco go up and down completely randomly.

Pair Corralation between Central Garden and Shineco

Given the investment horizon of 90 days Central Garden Pet is expected to under-perform the Shineco. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 8.2 times less risky than Shineco. The stock trades about -0.33 of its potential returns per unit of risk. The Shineco is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  215.00  in Shineco on April 2, 2024 and sell it today you would earn a total of  8.00  from holding Shineco or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Central Garden Pet  vs.  Shineco

Central Garden Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Garden is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Shineco

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shineco are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Shineco demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Garden and Shineco

The main advantage of trading using opposite Central Garden and Shineco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, Shineco 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 Shineco will offset losses from the drop in Shineco's long position.

The idea behind Central Garden Pet and Shineco 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.