Correlation Between Lamb Weston and Davidstea
Can any of the company-specific risk be diversified away by investing in both Lamb Weston and Davidstea 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 Davidstea 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 Davidstea, you can compare the effects of market volatilities on Lamb Weston and Davidstea 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 Davidstea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Davidstea.
Diversification Opportunities for Lamb Weston and Davidstea
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lamb and Davidstea is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Davidstea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davidstea 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 Davidstea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davidstea has no effect on the direction of Lamb Weston i.e., Lamb Weston and Davidstea go up and down completely randomly.
Pair Corralation between Lamb Weston and Davidstea
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 0.28 times more return on investment than Davidstea. However, Lamb Weston Holdings is 3.56 times less risky than Davidstea. It trades about 0.04 of its potential returns per unit of risk. Davidstea is currently generating about -0.06 per unit of risk. If you would invest 6,214 in Lamb Weston Holdings on January 25, 2024 and sell it today you would earn a total of 2,158 from holding Lamb Weston Holdings or generate 34.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 57.89% |
| Values | Daily Returns |
Lamb Weston Holdings vs. Davidstea
Performance |
| Timeline |
| Lamb Weston Holdings |
| Davidstea |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lamb Weston and Davidstea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and Davidstea
The main advantage of trading using opposite Lamb Weston and Davidstea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston position performs unexpectedly, Davidstea 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 Davidstea will offset losses from the drop in Davidstea's long position.| Lamb Weston vs. Bunge Limited | Lamb Weston vs. Archer Daniels Midland | Lamb Weston vs. Fresh Del Monte | Lamb Weston vs. Limoneira Co |
| Davidstea vs. Natures Sunshine Products | Davidstea vs. Bridgford Foods | Davidstea vs. Lifeway Foods | Davidstea vs. Central Garden Pet |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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