Correlation Between Whole Earth and Campbell Soup

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

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

Diversification Opportunities for Whole Earth and Campbell Soup

-0.26

Correlation Coefficient

Whole Earth  Campbell Soup

Very good diversification

The 3 months correlation between Whole and Campbell is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Whole Earth Brands and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup and Whole Earth 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 Whole Earth Brands 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 Whole Earth i.e., Whole Earth and Campbell Soup go up and down completely randomly.

Pair Corralation between Whole Earth and Campbell Soup

Assuming the 90 days horizon Whole Earth Brands is expected to generate 12.5 times more return on investment than Campbell Soup. However, Whole Earth is 12.5 times more volatile than Campbell Soup. It trades about 0.07 of its potential returns per unit of risk. Campbell Soup is currently generating about 0.06 per unit of risk. If you would invest  4.62  in Whole Earth Brands on January 31, 2024 and sell it today you would lose (0.05) from holding Whole Earth Brands or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Whole Earth Brands  vs.  Campbell Soup

Whole Earth Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whole Earth Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Campbell Soup

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Campbell Soup are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Whole Earth and Campbell Soup

The main advantage of trading using opposite Whole Earth and Campbell Soup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whole Earth 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 Whole Earth Brands 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..