Correlation Between Lancaster Colony and WH Group

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

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

Diversification Opportunities for Lancaster Colony and WH Group

-0.52

Correlation Coefficient

Lancaster Colony  WH Group

Excellent diversification

The 3 months correlation between Lancaster and WHGRF is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and WH Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WH Group Limited 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 WH Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WH Group Limited has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and WH Group go up and down completely randomly.

Pair Corralation between Lancaster Colony and WH Group

Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the WH Group. But the stock apears to be less risky and, when comparing its historical volatility, Lancaster Colony is 30.88 times less risky than WH Group. The stock trades about 0.0 of its potential returns per unit of risk. The WH Group Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  63.00  in WH Group Limited on October 10, 2024 and sell it today you would earn a total of  18.00  from holding WH Group Limited or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	65.86%
Values	Daily Returns

Lancaster Colony  vs.  WH Group Limited

Lancaster Colony

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancaster Colony has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

WH Group Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WH Group Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, WH Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lancaster Colony and WH Group

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

The idea behind Lancaster Colony and WH Group Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.