Correlation Between Lancaster Colony and Branded Legacy

Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and Branded Legacy 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 Lancaster Colony and Branded Legacy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lancaster Colony and Branded Legacy, you can compare the effects of market volatilities on Lancaster Colony and Branded Legacy 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 Lancaster Colony with a short position of Branded Legacy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Branded Legacy.

Diversification Opportunities for Lancaster Colony and Branded Legacy

0.37

Correlation Coefficient

Lancaster Colony  Branded Legacy

Weak diversification

The 3 months correlation between Lancaster and Branded is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Branded Legacy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Branded Legacy and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Branded Legacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Branded Legacy has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Branded Legacy go up and down completely randomly.

Pair Corralation between Lancaster Colony and Branded Legacy

Given the investment horizon of 90 days Lancaster Colony is expected to generate 39.44 times less return on investment than Branded Legacy. But when comparing it to its historical volatility, Lancaster Colony is 7.36 times less risky than Branded Legacy. It trades about 0.02 of its potential returns per unit of risk. Branded Legacy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Branded Legacy on December 30, 2024 and sell it today you would earn a total of  0.03  from holding Branded Legacy or generate 60.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Lancaster Colony  vs.  Branded Legacy

Lancaster Colony

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Branded Legacy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Branded Legacy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Branded Legacy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Branded Legacy

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

The idea behind Lancaster Colony and Branded Legacy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.