Correlation Between John B and Treehouse Foods

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

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

Diversification Opportunities for John B and Treehouse Foods

0.65

Correlation Coefficient

John B  Treehouse Foods

Poor diversification

The 3 months correlation between John and Treehouse is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding John B Sanfilippo and Treehouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treehouse Foods and John B 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 John B Sanfilippo 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 John B i.e., John B and Treehouse Foods go up and down completely randomly.

Pair Corralation between John B and Treehouse Foods

Given the investment horizon of 90 days John B Sanfilippo is expected to generate 0.97 times more return on investment than Treehouse Foods. However, John B Sanfilippo is 1.03 times less risky than Treehouse Foods. It trades about -0.14 of its potential returns per unit of risk. Treehouse Foods is currently generating about -0.17 per unit of risk. If you would invest  8,585  in John B Sanfilippo on December 29, 2024 and sell it today you would lose (1,504) from holding John B Sanfilippo or give up 17.52% of portfolio value over 90 days.

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

John B Sanfilippo  vs.  Treehouse Foods

John B Sanfilippo

Risk-Adjusted Performance

Very Weak

Over the last 90 days John B Sanfilippo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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. In spite of unsteady performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with John B and Treehouse Foods

The main advantage of trading using opposite John B and Treehouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John B 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 John B Sanfilippo 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.