Correlation Between Central Garden and Laboratory

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

Diversification Opportunities for Central Garden and Laboratory

0.61

Correlation Coefficient

Central Garden  Laboratory

Poor diversification

The 3 months correlation between Central and Laboratory is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Laboratory of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory 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 Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Central Garden i.e., Central Garden and Laboratory go up and down completely randomly.

Pair Corralation between Central Garden and Laboratory

Assuming the 90 days horizon Central Garden Pet is expected to generate 1.52 times more return on investment than Laboratory. However, Central Garden is 1.52 times more volatile than Laboratory of. It trades about 0.04 of its potential returns per unit of risk. Laboratory of is currently generating about 0.05 per unit of risk. If you would invest  3,218  in Central Garden Pet on September 24, 2024 and sell it today you would earn a total of  109.00  from holding Central Garden Pet or generate 3.39% return on investment over 90 days.

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

Central Garden Pet  vs.  Laboratory of

Central Garden Pet

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Laboratory

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Laboratory of are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Central Garden and Laboratory

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

The idea behind Central Garden Pet and Laboratory of 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.