Correlation Between Spectrum Brands and Bellring Brands

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

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

Diversification Opportunities for Spectrum Brands and Bellring Brands

0.07

Correlation Coefficient

Spectrum Brands  Bellring Brands

Significant diversification

The 3 months correlation between Spectrum and Bellring is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Spectrum Brands Holdings and Bellring Brands LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bellring Brands LLC and Spectrum Brands 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 Spectrum Brands Holdings are associated (or correlated) with Bellring Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bellring Brands LLC has no effect on the direction of Spectrum Brands i.e., Spectrum Brands and Bellring Brands go up and down completely randomly.

Pair Corralation between Spectrum Brands and Bellring Brands

Considering the 90-day investment horizon Spectrum Brands is expected to generate 1.42 times less return on investment than Bellring Brands. In addition to that, Spectrum Brands is 1.06 times more volatile than Bellring Brands LLC. It trades about 0.07 of its total potential returns per unit of risk. Bellring Brands LLC is currently generating about 0.1 per unit of volatility. If you would invest  5,090  in Bellring Brands LLC on September 21, 2024 and sell it today you would earn a total of  2,691  from holding Bellring Brands LLC or generate 52.87% return on investment over 90 days.

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

Spectrum Brands Holdings  vs.  Bellring Brands LLC

Spectrum Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Bellring Brands LLC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bellring Brands LLC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Bellring Brands reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spectrum Brands and Bellring Brands

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

The idea behind Spectrum Brands Holdings and Bellring Brands LLC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.