Correlation Between Calavo Growers and US Foods

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

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

Diversification Opportunities for Calavo Growers and US Foods

0.4

Correlation Coefficient

Calavo Growers  US Foods

Very weak diversification

The 3 months correlation between Calavo and USFD is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Calavo Growers and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding and Calavo Growers 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 Calavo Growers are associated (or correlated) with US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of Calavo Growers i.e., Calavo Growers and US Foods go up and down completely randomly.

Pair Corralation between Calavo Growers and US Foods

Given the investment horizon of 90 days Calavo Growers is expected to generate 1.82 times more return on investment than US Foods. However, Calavo Growers is 1.82 times more volatile than US Foods Holding. It trades about 0.14 of its potential returns per unit of risk. US Foods Holding is currently generating about 0.22 per unit of risk. If you would invest  2,278  in Calavo Growers on August 31, 2024 and sell it today you would earn a total of  485.00  from holding Calavo Growers or generate 21.29% return on investment over 90 days.

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

Calavo Growers  vs.  US Foods Holding

Calavo Growers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calavo Growers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, Calavo Growers showed solid returns over the last few months and may actually be approaching a breakup point.

US Foods Holding

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, US Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Calavo Growers and US Foods

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

The idea behind Calavo Growers and US Foods Holding 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.