Correlation Between Treehouse Foods and Lamb Weston

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

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

Diversification Opportunities for Treehouse Foods and Lamb Weston

-0.79

Correlation Coefficient

Treehouse Foods  Lamb Weston

Pay attention - limited upside

The 3 months correlation between Treehouse and Lamb is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings and Treehouse Foods 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 Treehouse Foods are associated (or correlated) with Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and Lamb Weston go up and down completely randomly.

Pair Corralation between Treehouse Foods and Lamb Weston

Considering the 90-day investment horizon Treehouse Foods is expected to under-perform the Lamb Weston. In addition to that, Treehouse Foods is 2.14 times more volatile than Lamb Weston Holdings. It trades about -0.09 of its total potential returns per unit of risk. Lamb Weston Holdings is currently generating about -0.19 per unit of volatility. If you would invest  8,099  in Lamb Weston Holdings on September 12, 2024 and sell it today you would lose (603.00) from holding Lamb Weston Holdings or give up 7.45% of portfolio value over 90 days.

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

Treehouse Foods  vs.  Lamb Weston Holdings

Treehouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treehouse Foods 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 technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lamb Weston Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Lamb Weston showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treehouse Foods and Lamb Weston

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

The idea behind Treehouse Foods and Lamb Weston Holdings 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.