Correlation Between Lamb Weston and Becton Dickinson

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

Diversification Opportunities for Lamb Weston and Becton Dickinson

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lamb Weston and Becton is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Becton Dickinson And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Becton Dickinson And and Lamb Weston 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 Lamb Weston Holdings are associated (or correlated) with Becton Dickinson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Becton Dickinson And has no effect on the direction of Lamb Weston i.e., Lamb Weston and Becton Dickinson go up and down completely randomly.

Pair Corralation between Lamb Weston and Becton Dickinson

Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 1.42 times more return on investment than Becton Dickinson. However, Lamb Weston is 1.42 times more volatile than Becton Dickinson And. It trades about 0.02 of its potential returns per unit of risk. Becton Dickinson And is currently generating about 0.01 per unit of risk. If you would invest  7,533  in Lamb Weston Holdings on August 31, 2022 and sell it today you would earn a total of  1,014  from holding Lamb Weston Holdings or generate 13.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Lamb Weston Holdings  vs.  Becton Dickinson And

 Performance (%) 
       Timeline  
Lamb Weston Holdings 
Lamb Weston Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Lamb Weston Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lamb Weston may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Lamb Weston Price Channel

Becton Dickinson And 
Becton Performance
0 of 100
Over the last 90 days Becton Dickinson And has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Becton Dickinson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Becton Price Channel

Lamb Weston and Becton Dickinson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lamb Weston and Becton Dickinson

The main advantage of trading using opposite Lamb Weston and Becton Dickinson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston position performs unexpectedly, Becton Dickinson 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 Becton Dickinson will offset losses from the drop in Becton Dickinson's long position.
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The idea behind Lamb Weston Holdings and Becton Dickinson And 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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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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