Correlation Between Treehouse Foods and Lancaster Colony

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

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

Diversification Opportunities for Treehouse Foods and Lancaster Colony

-0.23

Correlation Coefficient

Treehouse Foods  Lancaster Colony

Very good diversification

The 3 months correlation between Treehouse and Lancaster is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Lancaster Colony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lancaster Colony 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 Lancaster Colony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lancaster Colony has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and Lancaster Colony go up and down completely randomly.

Pair Corralation between Treehouse Foods and Lancaster Colony

Considering the 90-day investment horizon Treehouse Foods is expected to under-perform the Lancaster Colony. In addition to that, Treehouse Foods is 1.24 times more volatile than Lancaster Colony. It trades about -0.2 of its total potential returns per unit of risk. Lancaster Colony is currently generating about 0.02 per unit of volatility. If you would invest  17,263  in Lancaster Colony on January 3, 2025 and sell it today you would earn a total of  244.00  from holding Lancaster Colony or generate 1.41% return on investment over 90 days.

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

Treehouse Foods  vs.  Lancaster Colony

Treehouse Foods

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lancaster Colony

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Treehouse Foods and Lancaster Colony

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

The idea behind Treehouse Foods and Lancaster Colony 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.