Correlation Between Calbee and Treehouse Foods

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

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

Diversification Opportunities for Calbee and Treehouse Foods

-0.32

Correlation Coefficient

Calbee  Treehouse Foods

Very good diversification

The 3 months correlation between Calbee and Treehouse is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Calbee Inc and Treehouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treehouse Foods and Calbee 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 Calbee Inc are associated (or correlated) with Treehouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treehouse Foods has no effect on the direction of Calbee i.e., Calbee and Treehouse Foods go up and down completely randomly.

Pair Corralation between Calbee and Treehouse Foods

Assuming the 90 days horizon Calbee Inc is expected to generate 1.17 times more return on investment than Treehouse Foods. However, Calbee is 1.17 times more volatile than Treehouse Foods. It trades about 0.02 of its potential returns per unit of risk. Treehouse Foods is currently generating about 0.01 per unit of risk. If you would invest  484.00  in Calbee Inc on February 5, 2024 and sell it today you would earn a total of  75.00  from holding Calbee Inc or generate 15.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Calbee Inc  vs.  Treehouse Foods

Calbee Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calbee Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Calbee is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Calbee and Treehouse Foods

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

The idea behind Calbee Inc and Treehouse Foods 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.