Correlation Between Treehouse Foods and Hostess Brands

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

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

Diversification Opportunities for Treehouse Foods and Hostess Brands

-0.69

Correlation Coefficient

Treehouse Foods  Hostess Brands

Excellent diversification

The 3 months correlation between Treehouse and Hostess is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Hostess Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hostess Brands and Treehouse Foods 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 Treehouse Foods are associated (or correlated) with Hostess Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hostess Brands has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and Hostess Brands go up and down completely randomly.

Pair Corralation between Treehouse Foods and Hostess Brands

If you would invest  3,330  in Hostess Brands on February 4, 2024 and sell it today you would earn a total of  0.00  from holding Hostess Brands or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

Treehouse Foods  vs.  Hostess Brands

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 uncertain 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.

Hostess Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hostess Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hostess Brands is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Treehouse Foods and Hostess Brands

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

The idea behind Treehouse Foods and Hostess 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.