Correlation Between Life On and Chefs Warehouse

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

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

Diversification Opportunities for Life On and Chefs Warehouse

-0.27

Correlation Coefficient

Life On  Chefs Warehouse

Very good diversification

The 3 months correlation between Life and Chefs is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Life On Earth and The Chefs Warehouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chefs Warehouse and Life On 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 Life On Earth are associated (or correlated) with Chefs Warehouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chefs Warehouse has no effect on the direction of Life On i.e., Life On and Chefs Warehouse go up and down completely randomly.

Pair Corralation between Life On and Chefs Warehouse

If you would invest  4,071  in The Chefs Warehouse on September 13, 2024 and sell it today you would earn a total of  795.00  from holding The Chefs Warehouse or generate 19.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Life On Earth  vs.  The Chefs Warehouse

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.

Chefs Warehouse

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Chefs Warehouse are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Chefs Warehouse reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Life On and Chefs Warehouse

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

The idea behind Life On Earth and The Chefs Warehouse 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.