Correlation Between Chefs Warehouse and Andersons

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

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

Diversification Opportunities for Chefs Warehouse and Andersons

0.33

Correlation Coefficient

Chefs Warehouse  Andersons

Weak diversification

The 3 months correlation between Chefs and Andersons is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Chefs Warehouse and The Andersons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andersons and Chefs Warehouse 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 The Chefs Warehouse are associated (or correlated) with Andersons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andersons has no effect on the direction of Chefs Warehouse i.e., Chefs Warehouse and Andersons go up and down completely randomly.

Pair Corralation between Chefs Warehouse and Andersons

Given the investment horizon of 90 days The Chefs Warehouse is expected to generate 0.81 times more return on investment than Andersons. However, The Chefs Warehouse is 1.24 times less risky than Andersons. It trades about 0.15 of its potential returns per unit of risk. The Andersons is currently generating about 0.04 per unit of risk. If you would invest  3,650  in The Chefs Warehouse on August 10, 2024 and sell it today you would earn a total of  638.00  from holding The Chefs Warehouse or generate 17.48% return on investment over 90 days.

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

The Chefs Warehouse  vs.  The Andersons

Chefs Warehouse

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Chefs Warehouse are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent technical and fundamental indicators, Chefs Warehouse reported solid returns over the last few months and may actually be approaching a breakup point.

Andersons

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Andersons are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Andersons is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chefs Warehouse and Andersons

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

The idea behind The Chefs Warehouse and The Andersons 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.