Correlation Between Clorox and Central Garden

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

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

Diversification Opportunities for Clorox and Central Garden

0.35

Correlation Coefficient

Clorox  Central Garden

Weak diversification

The 3 months correlation between Clorox and Central is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Clorox and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet and Clorox 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 Clorox are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Clorox i.e., Clorox and Central Garden go up and down completely randomly.

Pair Corralation between Clorox and Central Garden

Considering the 90-day investment horizon The Clorox is expected to under-perform the Central Garden. But the stock apears to be less risky and, when comparing its historical volatility, The Clorox is 1.33 times less risky than Central Garden. The stock trades about -0.11 of its potential returns per unit of risk. The Central Garden Pet is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,004  in Central Garden Pet on December 20, 2024 and sell it today you would lose (370.00) from holding Central Garden Pet or give up 9.24% of portfolio value over 90 days.

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

The Clorox  vs.  Central Garden Pet

Clorox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Clorox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Central Garden Pet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Clorox and Central Garden

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

The idea behind The Clorox and Central Garden Pet 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.