Correlation Between Central Garden and HealthEquity

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

Diversification Opportunities for Central Garden and HealthEquity

0.49

Correlation Coefficient

Central Garden  HealthEquity

Very weak diversification

The 3 months correlation between Central and HealthEquity is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and HealthEquity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthEquity 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 HealthEquity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthEquity has no effect on the direction of Central Garden i.e., Central Garden and HealthEquity go up and down completely randomly.

Pair Corralation between Central Garden and HealthEquity

Assuming the 90 days horizon Central Garden Pet is expected to generate 0.84 times more return on investment than HealthEquity. However, Central Garden Pet is 1.19 times less risky than HealthEquity. It trades about 0.32 of its potential returns per unit of risk. HealthEquity is currently generating about -0.26 per unit of risk. If you would invest  3,176  in Central Garden Pet on September 17, 2024 and sell it today you would earn a total of  305.00  from holding Central Garden Pet or generate 9.6% return on investment over 90 days.

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

Central Garden Pet  vs.  HealthEquity

Central Garden Pet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HealthEquity

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HealthEquity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, HealthEquity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Garden and HealthEquity

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

The idea behind Central Garden Pet and HealthEquity 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 CEOs Directory module to screen CEOs from public companies around the world.