Correlation Between Central Garden and Aryzta AG

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

Diversification Opportunities for Central Garden and Aryzta AG

0.07

Correlation Coefficient

Central Garden  Aryzta AG

Significant diversification

The 3 months correlation between Central and Aryzta is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Aryzta AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aryzta AG PK 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 Aryzta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aryzta AG PK has no effect on the direction of Central Garden i.e., Central Garden and Aryzta AG go up and down completely randomly.

Pair Corralation between Central Garden and Aryzta AG

Assuming the 90 days horizon Central Garden Pet is expected to under-perform the Aryzta AG. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 2.1 times less risky than Aryzta AG. The stock trades about -0.01 of its potential returns per unit of risk. The Aryzta AG PK is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Aryzta AG PK on December 30, 2024 and sell it today you would earn a total of  24.00  from holding Aryzta AG PK or generate 27.91% return on investment over 90 days.

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

Central Garden Pet  vs.  Aryzta AG PK

Central Garden Pet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Central Garden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aryzta AG PK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aryzta AG PK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Aryzta AG showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Garden and Aryzta AG

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

The idea behind Central Garden Pet and Aryzta AG PK 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.