Correlation Between Blue Star and Central Garden

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

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

Diversification Opportunities for Blue Star and Central Garden

-0.06

Correlation Coefficient

Blue Star  Central Garden

Good diversification

The 3 months correlation between Blue and Central is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Blue Star Foods 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 Blue Star 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 Blue Star Foods 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 Blue Star i.e., Blue Star and Central Garden go up and down completely randomly.

Pair Corralation between Blue Star and Central Garden

Given the investment horizon of 90 days Blue Star Foods is expected to under-perform the Central Garden. In addition to that, Blue Star is 4.48 times more volatile than Central Garden Pet. It trades about -0.15 of its total potential returns per unit of risk. Central Garden Pet is currently generating about 0.07 per unit of volatility. If you would invest  4,121  in Central Garden Pet on February 5, 2024 and sell it today you would earn a total of  94.00  from holding Central Garden Pet or generate 2.28% return on investment over 90 days.

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

Blue Star Foods  vs.  Central Garden Pet

Blue Star Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Central Garden Pet

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Central Garden unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blue Star and Central Garden

The main advantage of trading using opposite Blue Star and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Star 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 Blue Star Foods 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 Stocks Directory module to find actively traded stocks across global markets.