Correlation Between Lamb Weston and Vanguard Consumer

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

Diversification Opportunities for Lamb Weston and Vanguard Consumer

-0.27

Correlation Coefficient

Lamb Weston  Vanguard Consumer

Very good diversification

The 3 months correlation between Lamb and Vanguard is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Vanguard Sumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Staples 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 Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Staples has no effect on the direction of Lamb Weston i.e., Lamb Weston and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Lamb Weston and Vanguard Consumer

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to under-perform the Vanguard Consumer. In addition to that, Lamb Weston is 3.92 times more volatile than Vanguard Sumer Staples. It trades about -0.03 of its total potential returns per unit of risk. Vanguard Sumer Staples is currently generating about 0.09 per unit of volatility. If you would invest  9,086  in Vanguard Sumer Staples on September 1, 2024 and sell it today you would earn a total of  1,945  from holding Vanguard Sumer Staples or generate 21.41% return on investment over 90 days.

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

Lamb Weston Holdings  vs.  Vanguard Sumer Staples

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.

Vanguard Sumer Staples

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Sumer Staples are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Consumer is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lamb Weston and Vanguard Consumer

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

The idea behind Lamb Weston Holdings and Vanguard Sumer Staples 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.