Correlation Between Lancaster Colony and Post Holdings

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

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

Diversification Opportunities for Lancaster Colony and Post Holdings

0.49

Correlation Coefficient

Lancaster Colony  Post Holdings

Very weak diversification

The 3 months correlation between Lancaster and Post is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Post Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Post Holdings and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Post Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Post Holdings has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Post Holdings go up and down completely randomly.

Pair Corralation between Lancaster Colony and Post Holdings

Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the Post Holdings. In addition to that, Lancaster Colony is 1.13 times more volatile than Post Holdings. It trades about -0.44 of its total potential returns per unit of risk. Post Holdings is currently generating about 0.0 per unit of volatility. If you would invest  10,544  in Post Holdings on January 30, 2024 and sell it today you would lose (6.00) from holding Post Holdings or give up 0.06% of portfolio value over 90 days.

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

Lancaster Colony  vs.  Post Holdings

Lancaster Colony

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lancaster Colony has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Post Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Post Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Post Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Lancaster Colony and Post Holdings

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

The idea behind Lancaster Colony and Post Holdings 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.