Correlation Between BG Foods and Lamb Weston
Can any of the company-specific risk be diversified away by investing in both BG 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 BG 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 BG Foods and Lamb Weston Holdings, you can compare the effects of market volatilities on BG 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 BG Foods with a short position of Lamb Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Lamb Weston.
Diversification Opportunities for BG Foods and Lamb Weston
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BGS and Lamb is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding BG 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 BG 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 BG 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 BG Foods i.e., BG Foods and Lamb Weston go up and down completely randomly.
Pair Corralation between BG Foods and Lamb Weston
Considering the 90-day investment horizon BG Foods is expected to generate 1.47 times more return on investment than Lamb Weston. However, BG Foods is 1.47 times more volatile than Lamb Weston Holdings. It trades about 0.09 of its potential returns per unit of risk. Lamb Weston Holdings is currently generating about -0.02 per unit of risk. If you would invest 797.00 in BG Foods on January 20, 2024 and sell it today you would earn a total of 261.00 from holding BG Foods or generate 32.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
BG Foods vs. Lamb Weston Holdings
Performance |
Timeline |
BG Foods |
Lamb Weston Holdings |
BG Foods and Lamb Weston Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BG Foods and Lamb Weston
The main advantage of trading using opposite BG Foods and Lamb Weston positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG 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.BG Foods vs. Green Globe International | BG Foods vs. Greenlane Holdings | BG Foods vs. 22nd Century Group | BG Foods vs. 1606 Corp |
Lamb Weston vs. Green Globe International | Lamb Weston vs. Greenlane Holdings | Lamb Weston vs. 22nd Century Group | Lamb Weston vs. 1606 Corp |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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