Correlation Between Data Modul and TreeHouse Foods

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

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

Diversification Opportunities for Data Modul and TreeHouse Foods

0.22

Correlation Coefficient

Data Modul  TreeHouse Foods

Modest diversification

The 3 months correlation between Data and TreeHouse is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul AG and TreeHouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TreeHouse Foods and Data Modul 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 Data Modul AG are associated (or correlated) with TreeHouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TreeHouse Foods has no effect on the direction of Data Modul i.e., Data Modul and TreeHouse Foods go up and down completely randomly.

Pair Corralation between Data Modul and TreeHouse Foods

Assuming the 90 days trading horizon Data Modul AG is expected to generate 1.03 times more return on investment than TreeHouse Foods. However, Data Modul is 1.03 times more volatile than TreeHouse Foods. It trades about -0.01 of its potential returns per unit of risk. TreeHouse Foods is currently generating about -0.16 per unit of risk. If you would invest  2,700  in Data Modul AG on December 22, 2024 and sell it today you would lose (80.00) from holding Data Modul AG or give up 2.96% of portfolio value over 90 days.

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

Data Modul AG  vs.  TreeHouse Foods

Data Modul AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Modul AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Data Modul is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

TreeHouse Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days TreeHouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Data Modul and TreeHouse Foods

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

The idea behind Data Modul AG and TreeHouse 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.