Correlation Between Utz Brands and Lamb Weston

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

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

Diversification Opportunities for Utz Brands and Lamb Weston

-0.45

Correlation Coefficient

Utz Brands  Lamb Weston

Very good diversification

The 3 months correlation between Utz and Lamb is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Utz Brands and Lamb Weston Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamb Weston Holdings and Utz Brands 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 Utz Brands are associated (or correlated) with Lamb Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamb Weston Holdings has no effect on the direction of Utz Brands i.e., Utz Brands and Lamb Weston go up and down completely randomly.

Pair Corralation between Utz Brands and Lamb Weston

Considering the 90-day investment horizon Utz Brands is expected to generate 22.59 times less return on investment than Lamb Weston. In addition to that, Utz Brands is 1.11 times more volatile than Lamb Weston Holdings. It trades about 0.01 of its total potential returns per unit of risk. Lamb Weston Holdings is currently generating about 0.2 per unit of volatility. If you would invest  6,143  in Lamb Weston Holdings on September 3, 2024 and sell it today you would earn a total of  1,581  from holding Lamb Weston Holdings or generate 25.74% return on investment over 90 days.

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

Utz Brands  vs.  Lamb Weston Holdings

Utz Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utz Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Utz Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Lamb Weston Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 15 (%) 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.

Pair Trading with Utz Brands and Lamb Weston

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

The idea behind Utz Brands and Lamb Weston 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.