Correlation Between Lamb Weston and Fresh Del

Can any of the company-specific risk be diversified away by investing in both Lamb Weston and Fresh Del 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 Fresh Del 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 Fresh Del Monte, you can compare the effects of market volatilities on Lamb Weston and Fresh Del 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 Fresh Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Fresh Del.

Diversification Opportunities for Lamb Weston and Fresh Del

0.69

Correlation Coefficient

Lamb Weston  Fresh Del

Poor diversification

The 3 months correlation between Lamb and Fresh is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Fresh Del Monte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Del Monte 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 Fresh Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Del Monte has no effect on the direction of Lamb Weston i.e., Lamb Weston and Fresh Del go up and down completely randomly.

Pair Corralation between Lamb Weston and Fresh Del

Allowing for the 90-day total investment horizon Lamb Weston is expected to generate 4.48 times less return on investment than Fresh Del. In addition to that, Lamb Weston is 1.48 times more volatile than Fresh Del Monte. It trades about 0.04 of its total potential returns per unit of risk. Fresh Del Monte is currently generating about 0.26 per unit of volatility. If you would invest  3,279  in Fresh Del Monte on September 4, 2024 and sell it today you would earn a total of  213.00  from holding Fresh Del Monte or generate 6.5% return on investment over 90 days.

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

Lamb Weston Holdings  vs.  Fresh Del Monte

Lamb Weston Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lamb Weston showed solid returns over the last few months and may actually be approaching a breakup point.

Fresh Del Monte

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Fresh Del reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lamb Weston and Fresh Del

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

The idea behind Lamb Weston Holdings and Fresh Del Monte 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.

Check out your portfolio center.

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.