Correlation Between Khiron Life and TreeHouse Foods

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

By analyzing existing cross correlation between Khiron Life Sciences and TreeHouse Foods, you can compare the effects of market volatilities on Khiron Life and TreeHouse 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 Khiron Life with a short position of TreeHouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Khiron Life and TreeHouse Foods.

Diversification Opportunities for Khiron Life and TreeHouse Foods

0.0

Correlation Coefficient

Khiron Life  TreeHouse Foods

Pay attention - limited upside

The 3 months correlation between Khiron and TreeHouse is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Khiron Life Sciences and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods and Khiron Life 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 Khiron Life Sciences are associated (or correlated) with TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of Khiron Life i.e., Khiron Life and TreeHouse Foods go up and down completely randomly.

Pair Corralation between Khiron Life and TreeHouse Foods

Assuming the 90 days trading horizon Khiron Life Sciences is expected to under-perform the TreeHouse Foods. In addition to that, Khiron Life is 1.76 times more volatile than TreeHouse Foods. It trades about -0.04 of its total potential returns per unit of risk. TreeHouse Foods is currently generating about -0.02 per unit of volatility. If you would invest  4,520  in TreeHouse Foods on October 4, 2024 and sell it today you would lose (1,160) from holding TreeHouse Foods or give up 25.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Khiron Life Sciences  vs.  TreeHouse Foods

Khiron Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

TreeHouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TreeHouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TreeHouse Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Khiron Life and TreeHouse Foods

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

The idea behind Khiron Life Sciences and TreeHouse Foods 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.