Correlation Between Greencore Group and Sovos Brands

Can any of the company-specific risk be diversified away by investing in both Greencore Group and Sovos Brands 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 Greencore Group and Sovos Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Greencore Group PLC and Sovos Brands, you can compare the effects of market volatilities on Greencore Group and Sovos Brands 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 Greencore Group with a short position of Sovos Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greencore Group and Sovos Brands.

Diversification Opportunities for Greencore Group and Sovos Brands

0.38

Correlation Coefficient

Greencore Group  Sovos Brands

Weak diversification

The 3 months correlation between Greencore and Sovos is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Greencore Group PLC and Sovos Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovos Brands and Greencore Group 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 Greencore Group PLC are associated (or correlated) with Sovos Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovos Brands has no effect on the direction of Greencore Group i.e., Greencore Group and Sovos Brands go up and down completely randomly.

Pair Corralation between Greencore Group and Sovos Brands

Assuming the 90 days horizon Greencore Group PLC is expected to generate 1.55 times more return on investment than Sovos Brands. However, Greencore Group is 1.55 times more volatile than Sovos Brands. It trades about 0.09 of its potential returns per unit of risk. Sovos Brands is currently generating about 0.1 per unit of risk. If you would invest  315.00  in Greencore Group PLC on September 20, 2024 and sell it today you would earn a total of  725.00  from holding Greencore Group PLC or generate 230.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.43%
Values	Daily Returns

Greencore Group PLC  vs.  Sovos Brands

Greencore Group PLC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Greencore Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Greencore Group showed solid returns over the last few months and may actually be approaching a breakup point.

Sovos Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Greencore Group and Sovos Brands

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

The idea behind Greencore Group PLC and Sovos Brands 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.