Correlation Between TDH Holdings and Central Garden

Can any of the company-specific risk be diversified away by investing in both TDH Holdings and Central Garden 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 TDH Holdings and Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for TDH Holdings and Central Garden

-0.7

Correlation Coefficient

TDH Holdings  Central Garden

Excellent diversification

The 3 months correlation between TDH and Central is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding TDH Holdings and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet and TDH Holdings 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 TDH Holdings are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of TDH Holdings i.e., TDH Holdings and Central Garden go up and down completely randomly.

Pair Corralation between TDH Holdings and Central Garden

Given the investment horizon of 90 days TDH Holdings is expected to generate 3.05 times more return on investment than Central Garden. However, TDH Holdings is 3.05 times more volatile than Central Garden Pet. It trades about 0.05 of its potential returns per unit of risk. Central Garden Pet is currently generating about -0.21 per unit of risk. If you would invest  117.00  in TDH Holdings on October 9, 2024 and sell it today you would earn a total of  3.00  from holding TDH Holdings or generate 2.56% return on investment over 90 days.

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

TDH Holdings  vs.  Central Garden Pet

TDH Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TDH Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Central Garden Pet

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TDH Holdings and Central Garden

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

The idea behind TDH Holdings and Central Garden Pet 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.