Correlation Between Campbell Soup and Central Garden

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

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

Diversification Opportunities for Campbell Soup and Central Garden

-0.74

Correlation Coefficient

Campbell Soup  Central Garden

Pay attention - limited upside

The 3 months correlation between Campbell and Central is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Campbell Soup 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 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 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 Campbell Soup i.e., Campbell Soup and Central Garden go up and down completely randomly.

Pair Corralation between Campbell Soup and Central Garden

Considering the 90-day investment horizon Campbell Soup is expected to under-perform the Central Garden. But the stock apears to be less risky and, when comparing its historical volatility, Campbell Soup is 1.33 times less risky than Central Garden. The stock trades about -0.18 of its potential returns per unit of risk. The Central Garden Pet is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,394  in Central Garden Pet on October 3, 2024 and sell it today you would lose (89.00) from holding Central Garden Pet or give up 2.62% of portfolio value over 90 days.

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

Campbell Soup  vs.  Central Garden Pet

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 latest uncertain performance, the Stock's basic 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

9 of 100

OK

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.

Pair Trading with Campbell Soup and Central Garden

The main advantage of trading using opposite Campbell Soup and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Campbell Soup 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 Campbell Soup 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..