Correlation Between Associated British and Campbell Soup

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Can any of the company-specific risk be diversified away by investing in both Associated British and Campbell Soup 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 Associated British and Campbell Soup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Campbell Soup, you can compare the effects of market volatilities on Associated British and Campbell Soup 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 Associated British with a short position of Campbell Soup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Campbell Soup.

Diversification Opportunities for Associated British and Campbell Soup

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Associated and Campbell is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Campbell Soup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campbell Soup and Associated British 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 Associated British Foods are associated (or correlated) with Campbell Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campbell Soup has no effect on the direction of Associated British i.e., Associated British and Campbell Soup go up and down completely randomly.

Pair Corralation between Associated British and Campbell Soup

Assuming the 90 days horizon Associated British Foods is expected to generate 1.36 times more return on investment than Campbell Soup. However, Associated British is 1.36 times more volatile than Campbell Soup. It trades about 0.08 of its potential returns per unit of risk. Campbell Soup is currently generating about 0.0 per unit of risk. If you would invest  1,806  in Associated British Foods on December 29, 2023 and sell it today you would earn a total of  1,369  from holding Associated British Foods or generate 75.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.77%
ValuesDaily Returns

Associated British Foods  vs.  Campbell Soup

 Performance 
       Timeline  
Associated British Foods 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Associated British is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Campbell Soup 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Campbell Soup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Campbell Soup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Associated British and Campbell Soup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Associated British and Campbell Soup

The main advantage of trading using opposite Associated British and Campbell Soup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, Campbell Soup 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 Campbell Soup will offset losses from the drop in Campbell Soup's long position.
The idea behind Associated British Foods and Campbell Soup 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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