Correlation Between Central Garden and Central Garden

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

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

Diversification Opportunities for Central Garden and Central Garden

0.98

Correlation Coefficient

Central Garden  Central Garden

Almost no diversification

The 3 months correlation between Central and Central is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet 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 Central Garden 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 Central Garden Pet 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 Central Garden i.e., Central Garden and Central Garden go up and down completely randomly.

Pair Corralation between Central Garden and Central Garden

Given the investment horizon of 90 days Central Garden Pet is expected to generate 1.07 times more return on investment than Central Garden. However, Central Garden is 1.07 times more volatile than Central Garden Pet. It trades about 0.04 of its potential returns per unit of risk. Central Garden Pet is currently generating about 0.04 per unit of risk. If you would invest  4,090  in Central Garden Pet on February 2, 2024 and sell it today you would earn a total of  54.00  from holding Central Garden Pet or generate 1.32% return on investment over 90 days.

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

Central Garden Pet  vs.  Central Garden Pet

Central Garden Pet

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Central Garden unveiled solid returns over the last few months and may actually be approaching a breakup point.

Central Garden Pet

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Central Garden and Central Garden

The main advantage of trading using opposite Central Garden and Central Garden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden 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 Central Garden Pet 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.