Correlation Between J J and Lancaster Colony

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

By analyzing existing cross correlation between J J Snack and Lancaster Colony, you can compare the effects of market volatilities on J J and Lancaster Colony 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 J J with a short position of Lancaster Colony. Check out your portfolio center. Please also check ongoing floating volatility patterns of J J and Lancaster Colony.

Diversification Opportunities for J J and Lancaster Colony

0.61

Correlation Coefficient

J J  Lancaster Colony

Poor diversification

The 3 months correlation between JJSF and Lancaster is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding J J Snack and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony and J J 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 J J Snack are associated (or correlated) with Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of J J i.e., J J and Lancaster Colony go up and down completely randomly.

Pair Corralation between J J and Lancaster Colony

Given the investment horizon of 90 days J J is expected to generate 6.48 times less return on investment than Lancaster Colony. But when comparing it to its historical volatility, J J Snack is 1.23 times less risky than Lancaster Colony. It trades about 0.02 of its potential returns per unit of risk. Lancaster Colony is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,992  in Lancaster Colony on August 31, 2024 and sell it today you would earn a total of  1,613  from holding Lancaster Colony or generate 9.49% return on investment over 90 days.

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

J J Snack  vs.  Lancaster Colony

J J Snack

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in J J Snack are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, J J is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lancaster Colony

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Lancaster Colony may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with J J and Lancaster Colony

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

The idea behind J J Snack and Lancaster Colony 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.