Correlation Between Chefs Warehouse and Calavo Growers

Can any of the company-specific risk be diversified away by investing in both Chefs Warehouse and Calavo Growers 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 Chefs Warehouse and Calavo Growers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Chefs Warehouse and Calavo Growers, you can compare the effects of market volatilities on Chefs Warehouse and Calavo Growers 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 Chefs Warehouse with a short position of Calavo Growers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chefs Warehouse and Calavo Growers.

Diversification Opportunities for Chefs Warehouse and Calavo Growers

-0.22

Correlation Coefficient

Chefs Warehouse  Calavo Growers

Very good diversification

The 3 months correlation between Chefs and Calavo is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Chefs Warehouse and Calavo Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calavo Growers and Chefs Warehouse 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 The Chefs Warehouse are associated (or correlated) with Calavo Growers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calavo Growers has no effect on the direction of Chefs Warehouse i.e., Chefs Warehouse and Calavo Growers go up and down completely randomly.

Pair Corralation between Chefs Warehouse and Calavo Growers

Given the investment horizon of 90 days The Chefs Warehouse is expected to generate 0.86 times more return on investment than Calavo Growers. However, The Chefs Warehouse is 1.16 times less risky than Calavo Growers. It trades about 0.07 of its potential returns per unit of risk. Calavo Growers is currently generating about -0.01 per unit of risk. If you would invest  4,900  in The Chefs Warehouse on December 28, 2024 and sell it today you would earn a total of  447.00  from holding The Chefs Warehouse or generate 9.12% return on investment over 90 days.

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

The Chefs Warehouse  vs.  Calavo Growers

Chefs Warehouse

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Chefs Warehouse are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Chefs Warehouse may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Calavo Growers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calavo Growers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Calavo Growers is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chefs Warehouse and Calavo Growers

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

The idea behind The Chefs Warehouse and Calavo Growers 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.