Correlation Between PriceSmart and Calavo Growers

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

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

Diversification Opportunities for PriceSmart and Calavo Growers

0.33

Correlation Coefficient

PriceSmart  Calavo Growers

Weak diversification

The 3 months correlation between PriceSmart and Calavo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PriceSmart and Calavo Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calavo Growers and PriceSmart 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 PriceSmart 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 PriceSmart i.e., PriceSmart and Calavo Growers go up and down completely randomly.

Pair Corralation between PriceSmart and Calavo Growers

Given the investment horizon of 90 days PriceSmart is expected to generate 0.57 times more return on investment than Calavo Growers. However, PriceSmart is 1.75 times less risky than Calavo Growers. It trades about 0.0 of its potential returns per unit of risk. Calavo Growers is currently generating about -0.05 per unit of risk. If you would invest  8,308  in PriceSmart on February 29, 2024 and sell it today you would lose (9.00) from holding PriceSmart or give up 0.11% of portfolio value over 90 days.

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

PriceSmart  vs.  Calavo Growers

PriceSmart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PriceSmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, PriceSmart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Calavo Growers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calavo Growers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with PriceSmart and Calavo Growers

The main advantage of trading using opposite PriceSmart and Calavo Growers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PriceSmart 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 PriceSmart 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.