Correlation Between Chefs Warehouse and Life On

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

By analyzing existing cross correlation between The Chefs Warehouse and Life On Earth, you can compare the effects of market volatilities on Chefs Warehouse and Life On 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 Chefs Warehouse with a short position of Life On. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chefs Warehouse and Life On.

Diversification Opportunities for Chefs Warehouse and Life On

-0.15

Correlation Coefficient

Chefs Warehouse  Life On

Good diversification

The 3 months correlation between Chefs and Life is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding The Chefs Warehouse and Life On Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life On Earth and Chefs Warehouse 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 The Chefs Warehouse are associated (or correlated) with Life On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life On Earth has no effect on the direction of Chefs Warehouse i.e., Chefs Warehouse and Life On go up and down completely randomly.

Pair Corralation between Chefs Warehouse and Life On

If you would invest  3,999  in The Chefs Warehouse on September 5, 2024 and sell it today you would earn a total of  501.00  from holding The Chefs Warehouse or generate 12.53% return on investment over 90 days.

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

The Chefs Warehouse  vs.  Life On Earth

Chefs Warehouse

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Chefs Warehouse are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Chefs Warehouse may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Life On Earth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Life On Earth has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Life On is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chefs Warehouse and Life On

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

The idea behind The Chefs Warehouse and Life On Earth 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.