Correlation Between Chicken Soup and Powered Brands

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

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

Diversification Opportunities for Chicken Soup and Powered Brands

0.4

Correlation Coefficient

Chicken Soup  Powered Brands

Very weak diversification

The 3 months correlation between Chicken and Powered is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chicken Soup for and Powered Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powered Brands and Chicken Soup 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 Chicken Soup for are associated (or correlated) with Powered Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powered Brands has no effect on the direction of Chicken Soup i.e., Chicken Soup and Powered Brands go up and down completely randomly.

Pair Corralation between Chicken Soup and Powered Brands

Assuming the 90 days horizon Chicken Soup for is expected to under-perform the Powered Brands. But the stock apears to be less risky and, when comparing its historical volatility, Chicken Soup for is 6.23 times less risky than Powered Brands. The stock trades about -0.03 of its potential returns per unit of risk. The Powered Brands is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Powered Brands on January 17, 2024 and sell it today you would lose (18.00) from holding Powered Brands or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	31.35%
Values	Daily Returns

Chicken Soup for  vs.  Powered Brands

Chicken Soup for

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chicken Soup for has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Powered Brands

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Chicken Soup and Powered Brands

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

The idea behind Chicken Soup for and Powered Brands 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.