Correlation Between Hostess Brands and Simply Good

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

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

Diversification Opportunities for Hostess Brands and Simply Good

-0.54

Correlation Coefficient

Hostess Brands  Simply Good

Excellent diversification

The 3 months correlation between Hostess and Simply is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Hostess Brands and Simply Good Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simply Good Foods and Hostess 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 Hostess Brands are associated (or correlated) with Simply Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simply Good Foods has no effect on the direction of Hostess Brands i.e., Hostess Brands and Simply Good go up and down completely randomly.

Pair Corralation between Hostess Brands and Simply Good

Given the investment horizon of 90 days Hostess Brands is expected to generate 0.82 times more return on investment than Simply Good. However, Hostess Brands is 1.22 times less risky than Simply Good. It trades about 0.05 of its potential returns per unit of risk. Simply Good Foods is currently generating about 0.01 per unit of risk. If you would invest  2,255  in Hostess Brands on September 19, 2024 and sell it today you would earn a total of  185.00  from holding Hostess Brands or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.63%
Values	Daily Returns

Hostess Brands  vs.  Simply Good Foods

Hostess Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hostess Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hostess Brands is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Simply Good Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Simply Good disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hostess Brands and Simply Good

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

The idea behind Hostess Brands and Simply Good Foods 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.