Correlation Between Central Garden and BRC

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

Diversification Opportunities for Central Garden and BRC

-0.29

Correlation Coefficient

Central Garden  BRC

Very good diversification

The 3 months correlation between Central and BRC is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and BRC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC Inc 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 BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC Inc has no effect on the direction of Central Garden i.e., Central Garden and BRC go up and down completely randomly.

Pair Corralation between Central Garden and BRC

Assuming the 90 days horizon Central Garden Pet is expected to generate 0.55 times more return on investment than BRC. However, Central Garden Pet is 1.81 times less risky than BRC. It trades about 0.05 of its potential returns per unit of risk. BRC Inc is currently generating about -0.02 per unit of risk. If you would invest  3,307  in Central Garden Pet on September 13, 2024 and sell it today you would earn a total of  145.00  from holding Central Garden Pet or generate 4.38% return on investment over 90 days.

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

Central Garden Pet  vs.  BRC Inc

Central Garden Pet

Risk-Adjusted Performance

3 of 100

Modest

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

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BRC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Central Garden and BRC

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

The idea behind Central Garden Pet and BRC Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.