Correlation Between Central Garden and Sow Good

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

Diversification Opportunities for Central Garden and Sow Good

-0.74

Correlation Coefficient

Central Garden  Sow Good

Pay attention - limited upside

The 3 months correlation between Central and Sow is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Sow Good Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sow Good Common 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 Sow Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sow Good Common has no effect on the direction of Central Garden i.e., Central Garden and Sow Good go up and down completely randomly.

Pair Corralation between Central Garden and Sow Good

Assuming the 90 days horizon Central Garden Pet is expected to under-perform the Sow Good. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 4.36 times less risky than Sow Good. The stock trades about -0.14 of its potential returns per unit of risk. The Sow Good Common is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  299.00  in Sow Good Common on October 6, 2024 and sell it today you would lose (21.00) from holding Sow Good Common or give up 7.02% of portfolio value over 90 days.

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

Central Garden Pet  vs.  Sow Good Common

Central Garden Pet

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden sustained solid returns over the last few months and may actually be approaching a breakup point.

Sow Good Common

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sow Good Common has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Central Garden and Sow Good

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

The idea behind Central Garden Pet and Sow Good Common 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.