Correlation Between Lancaster Colony and Grand Havana

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

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

Diversification Opportunities for Lancaster Colony and Grand Havana

0.44

Correlation Coefficient

Lancaster Colony  Grand Havana

Very weak diversification

The 3 months correlation between Lancaster and Grand is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Grand Havana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Havana 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 Grand Havana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Havana has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Grand Havana go up and down completely randomly.

Pair Corralation between Lancaster Colony and Grand Havana

Given the investment horizon of 90 days Lancaster Colony is expected to generate 7.65 times less return on investment than Grand Havana. But when comparing it to its historical volatility, Lancaster Colony is 5.46 times less risky than Grand Havana. It trades about 0.03 of its potential returns per unit of risk. Grand Havana is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.05  in Grand Havana on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Grand Havana or generate 0.0% return on investment over 90 days.

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

Lancaster Colony  vs.  Grand Havana

Lancaster Colony

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grand Havana

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Havana are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Grand Havana showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Grand Havana

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

The idea behind Lancaster Colony and Grand Havana 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.