Correlation Between Lancaster Colony and Edible Garden

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

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

Diversification Opportunities for Lancaster Colony and Edible Garden

-0.14

Correlation Coefficient

Lancaster Colony  Edible Garden

Good diversification

The 3 months correlation between Lancaster and Edible is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Edible Garden AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edible Garden AG and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Edible Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edible Garden AG has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Edible Garden go up and down completely randomly.

Pair Corralation between Lancaster Colony and Edible Garden

Given the investment horizon of 90 days Lancaster Colony is expected to generate 752.97 times less return on investment than Edible Garden. But when comparing it to its historical volatility, Lancaster Colony is 23.23 times less risky than Edible Garden. It trades about 0.01 of its potential returns per unit of risk. Edible Garden AG is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  0.95  in Edible Garden AG on September 26, 2024 and sell it today you would earn a total of  8.15  from holding Edible Garden AG or generate 857.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

Lancaster Colony  vs.  Edible Garden AG

Lancaster Colony

Risk-Adjusted Performance

0 of 100

Very Weak

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

Edible Garden AG

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edible Garden AG are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Edible Garden showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Edible Garden

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

The idea behind Lancaster Colony and Edible Garden AG 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.