Correlation Between Lamb Weston and Post Holdings

Can any of the company-specific risk be diversified away by investing in both Lamb Weston and Post Holdings 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 Post Holdings 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 Post Holdings, you can compare the effects of market volatilities on Lamb Weston and Post Holdings 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 Post Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Post Holdings.

Diversification Opportunities for Lamb Weston and Post Holdings

-0.26

Correlation Coefficient

Lamb Weston  Post Holdings

Very good diversification

The 3 months correlation between Lamb and Post is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post Holdings 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 Post Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post Holdings has no effect on the direction of Lamb Weston i.e., Lamb Weston and Post Holdings go up and down completely randomly.

Pair Corralation between Lamb Weston and Post Holdings

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 1.91 times more return on investment than Post Holdings. However, Lamb Weston is 1.91 times more volatile than Post Holdings. It trades about 0.14 of its potential returns per unit of risk. Post Holdings is currently generating about 0.05 per unit of risk. If you would invest  6,387  in Lamb Weston Holdings on September 13, 2024 and sell it today you would earn a total of  1,109  from holding Lamb Weston Holdings or generate 17.36% return on investment over 90 days.

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

Lamb Weston Holdings  vs.  Post Holdings

Lamb Weston Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Lamb Weston showed solid returns over the last few months and may actually be approaching a breakup point.

Post Holdings

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Post Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Post Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lamb Weston and Post Holdings

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

The idea behind Lamb Weston Holdings and Post Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.