Correlation Between Lamb Weston and Dole PLC

Can any of the company-specific risk be diversified away by investing in both Lamb Weston and Dole PLC 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 Lamb Weston and Dole PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lamb Weston Holdings and Dole PLC, you can compare the effects of market volatilities on Lamb Weston and Dole PLC 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 Lamb Weston with a short position of Dole PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Dole PLC.

Diversification Opportunities for Lamb Weston and Dole PLC

0.49

Correlation Coefficient

Lamb Weston  Dole PLC

Very weak diversification

The 3 months correlation between Lamb and Dole is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Dole PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dole PLC and Lamb Weston 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 Lamb Weston Holdings are associated (or correlated) with Dole PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dole PLC has no effect on the direction of Lamb Weston i.e., Lamb Weston and Dole PLC go up and down completely randomly.

Pair Corralation between Lamb Weston and Dole PLC

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 1.87 times more return on investment than Dole PLC. However, Lamb Weston is 1.87 times more volatile than Dole PLC. It trades about -0.03 of its potential returns per unit of risk. Dole PLC is currently generating about -0.18 per unit of risk. If you would invest  7,062  in Lamb Weston Holdings on October 9, 2024 and sell it today you would lose (757.00) from holding Lamb Weston Holdings or give up 10.72% of portfolio value over 90 days.

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

Lamb Weston Holdings  vs.  Dole PLC

Lamb Weston Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lamb Weston Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Dole PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dole PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lamb Weston and Dole PLC

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

The idea behind Lamb Weston Holdings and Dole PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.