Correlation Between Central Garden and JM Smucker

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

Diversification Opportunities for Central Garden and JM Smucker

-0.11

Correlation Coefficient

Central Garden  JM Smucker

Good diversification

The 3 months correlation between Central and SJM is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and JM Smucker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JM Smucker 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 JM Smucker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JM Smucker has no effect on the direction of Central Garden i.e., Central Garden and JM Smucker go up and down completely randomly.

Pair Corralation between Central Garden and JM Smucker

Assuming the 90 days horizon Central Garden Pet is expected to generate 1.33 times more return on investment than JM Smucker. However, Central Garden is 1.33 times more volatile than JM Smucker. It trades about 0.04 of its potential returns per unit of risk. JM Smucker is currently generating about -0.05 per unit of risk. If you would invest  3,218  in Central Garden Pet on September 24, 2024 and sell it today you would earn a total of  109.00  from holding Central Garden Pet or generate 3.39% 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.  JM Smucker

Central Garden Pet

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 2 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

JM Smucker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, JM Smucker is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Central Garden and JM Smucker

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

The idea behind Central Garden Pet and JM Smucker 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.