Correlation Between Campbell Soup and Associated British

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

By analyzing existing cross correlation between Campbell Soup and Associated British Foods, you can compare the effects of market volatilities on Campbell Soup and Associated British 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 Campbell Soup with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Campbell Soup and Associated British.

Diversification Opportunities for Campbell Soup and Associated British

0.68

Correlation Coefficient

Campbell Soup  Associated British

Poor diversification

The 3 months correlation between Campbell and Associated is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Campbell Soup and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Campbell Soup 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 Campbell Soup are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Campbell Soup i.e., Campbell Soup and Associated British go up and down completely randomly.

Pair Corralation between Campbell Soup and Associated British

Considering the 90-day investment horizon Campbell Soup is expected to generate 0.78 times more return on investment than Associated British. However, Campbell Soup is 1.28 times less risky than Associated British. It trades about 0.0 of its potential returns per unit of risk. Associated British Foods is currently generating about -0.02 per unit of risk. If you would invest  4,266  in Campbell Soup on September 20, 2024 and sell it today you would lose (108.00) from holding Campbell Soup or give up 2.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.47%
Values	Daily Returns

Campbell Soup  vs.  Associated British Foods

Campbell Soup

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Campbell Soup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Campbell Soup and Associated British

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

The idea behind Campbell Soup and Associated British 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.