Correlation Between Davidstea and Campbell Soup

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

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

Diversification Opportunities for Davidstea and Campbell Soup

-0.04

Correlation Coefficient

Davidstea  Campbell Soup

Good diversification

The 3 months correlation between Davidstea and Campbell is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Davidstea and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup and Davidstea 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 Davidstea are associated (or correlated) with Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Davidstea i.e., Davidstea and Campbell Soup go up and down completely randomly.

Pair Corralation between Davidstea and Campbell Soup

If you would invest  4,399  in Campbell Soup on February 4, 2024 and sell it today you would earn a total of  89.00  from holding Campbell Soup or generate 2.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Davidstea  vs.  Campbell Soup

Davidstea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Davidstea has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Davidstea is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Campbell Soup

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Campbell Soup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Campbell Soup is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Davidstea and Campbell Soup

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

The idea behind Davidstea and Campbell Soup 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.