Correlation Between Better Choice and Laird Superfood

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

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

Diversification Opportunities for Better Choice and Laird Superfood

-0.7

Correlation Coefficient

Better Choice  Laird Superfood

Excellent diversification

The 3 months correlation between Better and Laird is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Better Choice and Laird Superfood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laird Superfood and Better Choice 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 Better Choice are associated (or correlated) with Laird Superfood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laird Superfood has no effect on the direction of Better Choice i.e., Better Choice and Laird Superfood go up and down completely randomly.

Pair Corralation between Better Choice and Laird Superfood

Given the investment horizon of 90 days Better Choice is expected to generate 2.73 times less return on investment than Laird Superfood. But when comparing it to its historical volatility, Better Choice is 1.15 times less risky than Laird Superfood. It trades about 0.13 of its potential returns per unit of risk. Laird Superfood is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  578.00  in Laird Superfood on August 10, 2024 and sell it today you would earn a total of  319.00  from holding Laird Superfood or generate 55.19% return on investment over 90 days.

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

Better Choice  vs.  Laird Superfood

Better Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Choice has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Laird Superfood

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Laird Superfood are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Laird Superfood reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Better Choice and Laird Superfood

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

The idea behind Better Choice and Laird Superfood 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.