Correlation Between Lamb Weston and DDC Enterprise

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

By analyzing existing cross correlation between Lamb Weston Holdings and DDC Enterprise Limited, you can compare the effects of market volatilities on Lamb Weston and DDC Enterprise 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 Lamb Weston with a short position of DDC Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and DDC Enterprise.

Diversification Opportunities for Lamb Weston and DDC Enterprise

-0.34

Correlation Coefficient

Lamb Weston  DDC Enterprise

Very good diversification

The 3 months correlation between Lamb and DDC is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and DDC Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDC Enterprise and Lamb Weston 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 Lamb Weston Holdings are associated (or correlated) with DDC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDC Enterprise has no effect on the direction of Lamb Weston i.e., Lamb Weston and DDC Enterprise go up and down completely randomly.

Pair Corralation between Lamb Weston and DDC Enterprise

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to under-perform the DDC Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Lamb Weston Holdings is 1.04 times less risky than DDC Enterprise. The stock trades about -0.12 of its potential returns per unit of risk. The DDC Enterprise Limited is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  17.00  in DDC Enterprise Limited on October 1, 2024 and sell it today you would lose (1.70) from holding DDC Enterprise Limited or give up 10.0% of portfolio value over 90 days.

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

Lamb Weston Holdings  vs.  DDC Enterprise Limited

Lamb Weston Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lamb Weston may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DDC Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DDC Enterprise Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lamb Weston and DDC Enterprise

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

The idea behind Lamb Weston Holdings and DDC Enterprise Limited 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.