Correlation Between US Foods and Calavo Growers

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

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

Diversification Opportunities for US Foods and Calavo Growers

0.37

Correlation Coefficient

US Foods  Calavo Growers

Weak diversification

The 3 months correlation between USFD and Calavo is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and Calavo Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calavo Growers and US 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 US Foods Holding are associated (or correlated) with Calavo Growers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calavo Growers has no effect on the direction of US Foods i.e., US Foods and Calavo Growers go up and down completely randomly.

Pair Corralation between US Foods and Calavo Growers

Given the investment horizon of 90 days US Foods is expected to generate 1.2 times less return on investment than Calavo Growers. But when comparing it to its historical volatility, US Foods Holding is 1.82 times less risky than Calavo Growers. It trades about 0.22 of its potential returns per unit of risk. Calavo Growers is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,278  in Calavo Growers on September 3, 2024 and sell it today you would earn a total of  493.00  from holding Calavo Growers or generate 21.64% return on investment over 90 days.

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

US Foods Holding  vs.  Calavo Growers

US Foods Holding

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, US Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Calavo Growers

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with US Foods and Calavo Growers

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

The idea behind US Foods Holding and Calavo Growers 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.