Correlation Between Lancaster Colony and Laird Superfood

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

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

Diversification Opportunities for Lancaster Colony and Laird Superfood

0.62

Correlation Coefficient

Lancaster Colony  Laird Superfood

Poor diversification

The 3 months correlation between Lancaster and Laird is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Laird Superfood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laird Superfood 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 Laird Superfood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laird Superfood has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Laird Superfood go up and down completely randomly.

Pair Corralation between Lancaster Colony and Laird Superfood

Given the investment horizon of 90 days Lancaster Colony is expected to generate 0.48 times more return on investment than Laird Superfood. However, Lancaster Colony is 2.07 times less risky than Laird Superfood. It trades about -0.09 of its potential returns per unit of risk. Laird Superfood is currently generating about -0.17 per unit of risk. If you would invest  18,463  in Lancaster Colony on September 27, 2024 and sell it today you would lose (659.00) from holding Lancaster Colony or give up 3.57% of portfolio value over 90 days.

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

Lancaster Colony  vs.  Laird Superfood

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Laird Superfood

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Laird Superfood are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Laird Superfood reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Laird Superfood

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

The idea behind Lancaster Colony and Laird Superfood 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.