Correlation Between Central Garden and Post Holdings

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Can any of the company-specific risk be diversified away by investing in both Central Garden and Post Holdings 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 Post Holdings 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 Post Holdings, you can compare the effects of market volatilities on Central Garden and Post Holdings 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 Post Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Post Holdings.

Diversification Opportunities for Central Garden and Post Holdings

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Central and Post is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post Holdings 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 Post Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post Holdings has no effect on the direction of Central Garden i.e., Central Garden and Post Holdings go up and down completely randomly.

Pair Corralation between Central Garden and Post Holdings

Given the investment horizon of 90 days Central Garden Pet is expected to under-perform the Post Holdings. In addition to that, Central Garden is 1.78 times more volatile than Post Holdings. It trades about -0.21 of its total potential returns per unit of risk. Post Holdings is currently generating about -0.3 per unit of volatility. If you would invest  11,689  in Post Holdings on October 9, 2024 and sell it today you would lose (745.00) from holding Post Holdings or give up 6.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Central Garden Pet  vs.  Post Holdings

 Performance 
       Timeline  
Central Garden Pet 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Central Garden unveiled solid returns over the last few months and may actually be approaching a breakup point.
Post Holdings 

Risk-Adjusted Performance

0 of 100

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

Central Garden and Post Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Central Garden and Post Holdings

The main advantage of trading using opposite Central Garden and Post Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden position performs unexpectedly, Post Holdings 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 Post Holdings will offset losses from the drop in Post Holdings' long position.
The idea behind Central Garden Pet and Post Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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