Correlation Between Treehouse Foods and Shineco

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

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

Diversification Opportunities for Treehouse Foods and Shineco

0.83

Correlation Coefficient

Treehouse Foods  Shineco

Very poor diversification

The 3 months correlation between Treehouse and Shineco is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Shineco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shineco and Treehouse Foods 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 Treehouse Foods are associated (or correlated) with Shineco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shineco has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and Shineco go up and down completely randomly.

Pair Corralation between Treehouse Foods and Shineco

Considering the 90-day investment horizon Treehouse Foods is expected to generate 0.22 times more return on investment than Shineco. However, Treehouse Foods is 4.54 times less risky than Shineco. It trades about -0.16 of its potential returns per unit of risk. Shineco is currently generating about -0.11 per unit of risk. If you would invest  3,555  in Treehouse Foods on September 23, 2024 and sell it today you would lose (192.00) from holding Treehouse Foods or give up 5.4% of portfolio value over 90 days.

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

Treehouse Foods  vs.  Shineco

Treehouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treehouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Shineco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shineco has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Treehouse Foods and Shineco

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

The idea behind Treehouse Foods and Shineco 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.