Correlation Between Central Garden and Glanbia PLC

Can any of the company-specific risk be diversified away by investing in both Central Garden and Glanbia PLC 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 Glanbia PLC 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 Glanbia PLC ADR, you can compare the effects of market volatilities on Central Garden and Glanbia PLC 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 Glanbia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and Glanbia PLC.

Diversification Opportunities for Central Garden and Glanbia PLC

0.13

Correlation Coefficient

Central Garden  Glanbia PLC

Average diversification

The 3 months correlation between Central and Glanbia is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Glanbia PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glanbia PLC ADR 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 Glanbia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glanbia PLC ADR has no effect on the direction of Central Garden i.e., Central Garden and Glanbia PLC go up and down completely randomly.

Pair Corralation between Central Garden and Glanbia PLC

Given the investment horizon of 90 days Central Garden is expected to generate 19.92 times less return on investment than Glanbia PLC. But when comparing it to its historical volatility, Central Garden Pet is 3.03 times less risky than Glanbia PLC. It trades about 0.01 of its potential returns per unit of risk. Glanbia PLC ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,511  in Glanbia PLC ADR on March 5, 2025 and sell it today you would earn a total of  824.00  from holding Glanbia PLC ADR or generate 14.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Central Garden Pet  vs.  Glanbia PLC ADR

Central Garden Pet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Garden is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Glanbia PLC ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Glanbia PLC ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Glanbia PLC showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Garden and Glanbia PLC

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

The idea behind Central Garden Pet and Glanbia PLC ADR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.