Correlation Between Lamb Weston and Innovation Beverage

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

Diversification Opportunities for Lamb Weston and Innovation Beverage

0.93

Correlation Coefficient

Lamb Weston  Innovation Beverage

Almost no diversification

The 3 months correlation between Lamb and Innovation is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Innovation Beverage Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovation Beverage 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 Innovation Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovation Beverage has no effect on the direction of Lamb Weston i.e., Lamb Weston and Innovation Beverage go up and down completely randomly.

Pair Corralation between Lamb Weston and Innovation Beverage

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 0.32 times more return on investment than Innovation Beverage. However, Lamb Weston Holdings is 3.14 times less risky than Innovation Beverage. It trades about -0.13 of its potential returns per unit of risk. Innovation Beverage Group is currently generating about -0.15 per unit of risk. If you would invest  6,458  in Lamb Weston Holdings on December 28, 2024 and sell it today you would lose (1,068) from holding Lamb Weston Holdings or give up 16.54% of portfolio value over 90 days.

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

Lamb Weston Holdings  vs.  Innovation Beverage Group

Lamb Weston Holdings

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Innovation Beverage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovation Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lamb Weston and Innovation Beverage

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

The idea behind Lamb Weston Holdings and Innovation Beverage Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.