Correlation Between Ingredion Incorporated and Central Garden

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

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

Diversification Opportunities for Ingredion Incorporated and Central Garden

0.33

Correlation Coefficient

Ingredion Incorporated  Central Garden

Weak diversification

The 3 months correlation between Ingredion and Central is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ingredion Incorporated 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 Ingredion Incorporated 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 Ingredion Incorporated 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 Ingredion Incorporated i.e., Ingredion Incorporated and Central Garden go up and down completely randomly.

Pair Corralation between Ingredion Incorporated and Central Garden

Given the investment horizon of 90 days Ingredion Incorporated is expected to generate 0.63 times more return on investment than Central Garden. However, Ingredion Incorporated is 1.6 times less risky than Central Garden. It trades about -0.07 of its potential returns per unit of risk. Central Garden Pet is currently generating about -0.06 per unit of risk. If you would invest  13,789  in Ingredion Incorporated on December 22, 2024 and sell it today you would lose (756.00) from holding Ingredion Incorporated or give up 5.48% of portfolio value over 90 days.

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

Ingredion Incorporated  vs.  Central Garden Pet

Ingredion Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ingredion Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Ingredion Incorporated is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Central Garden Pet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Ingredion Incorporated and Central Garden

The main advantage of trading using opposite Ingredion Incorporated and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ingredion Incorporated 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 Ingredion Incorporated 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.