Correlation Between Central Garden and Steakholder Foods

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

Diversification Opportunities for Central Garden and Steakholder Foods

-0.87

Correlation Coefficient

Central Garden  Steakholder Foods

Pay attention - limited upside

The 3 months correlation between Central and Steakholder is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Steakholder Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steakholder Foods 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 Steakholder Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steakholder Foods has no effect on the direction of Central Garden i.e., Central Garden and Steakholder Foods go up and down completely randomly.

Pair Corralation between Central Garden and Steakholder Foods

Assuming the 90 days horizon Central Garden Pet is expected to generate 0.4 times more return on investment than Steakholder Foods. However, Central Garden Pet is 2.53 times less risky than Steakholder Foods. It trades about -0.1 of its potential returns per unit of risk. Steakholder Foods is currently generating about -0.35 per unit of risk. If you would invest  3,474  in Central Garden Pet on October 3, 2024 and sell it today you would lose (169.00) from holding Central Garden Pet or give up 4.86% of portfolio value over 90 days.

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

Central Garden Pet  vs.  Steakholder Foods

Central Garden Pet

Risk-Adjusted Performance

9 of 100

Modest

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. Despite somewhat weak basic indicators, Central Garden sustained solid returns over the last few months and may actually be approaching a breakup point.

Steakholder Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steakholder Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Central Garden and Steakholder Foods

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

The idea behind Central Garden Pet and Steakholder Foods 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.