Correlation Between Campbell Soup and Darling Ingredients

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

By analyzing existing cross correlation between Campbell Soup and Darling Ingredients, you can compare the effects of market volatilities on Campbell Soup and Darling Ingredients 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 Darling Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Campbell Soup and Darling Ingredients.

Diversification Opportunities for Campbell Soup and Darling Ingredients

-0.7

Correlation Coefficient

Campbell Soup  Darling Ingredients

Excellent diversification

The 3 months correlation between Campbell and Darling is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Campbell Soup and Darling Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darling Ingredients 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 Darling Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darling Ingredients has no effect on the direction of Campbell Soup i.e., Campbell Soup and Darling Ingredients go up and down completely randomly.

Pair Corralation between Campbell Soup and Darling Ingredients

Considering the 90-day investment horizon Campbell Soup is expected to under-perform the Darling Ingredients. But the stock apears to be less risky and, when comparing its historical volatility, Campbell Soup is 1.83 times less risky than Darling Ingredients. The stock trades about -0.14 of its potential returns per unit of risk. The Darling Ingredients is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,912  in Darling Ingredients on September 4, 2024 and sell it today you would earn a total of  61.00  from holding Darling Ingredients or generate 1.56% return on investment over 90 days.

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

Campbell Soup  vs.  Darling Ingredients

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.

Darling Ingredients

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darling Ingredients are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Darling Ingredients is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Campbell Soup and Darling Ingredients

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

The idea behind Campbell Soup and Darling Ingredients 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.