Correlation Between Central Garden and Grand Havana

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

Diversification Opportunities for Central Garden and Grand Havana

0.51

Correlation Coefficient

Central Garden  Grand Havana

Very weak diversification

The 3 months correlation between Central and Grand is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Grand Havana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand Havana 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 Grand Havana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand Havana has no effect on the direction of Central Garden i.e., Central Garden and Grand Havana go up and down completely randomly.

Pair Corralation between Central Garden and Grand Havana

Assuming the 90 days horizon Central Garden is expected to generate 3.24 times less return on investment than Grand Havana. But when comparing it to its historical volatility, Central Garden Pet is 6.68 times less risky than Grand Havana. It trades about 0.01 of its potential returns per unit of risk. Grand Havana is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.10  in Grand Havana on August 30, 2024 and sell it today you would lose (0.03) from holding Grand Havana or give up 30.0% of portfolio value over 90 days.

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

Central Garden Pet  vs.  Grand Havana

Central Garden Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Grand Havana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Havana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grand Havana is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Central Garden and Grand Havana

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

The idea behind Central Garden Pet and Grand Havana 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.