Correlation Between Treehouse Foods and Arqit Quantum

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Can any of the company-specific risk be diversified away by investing in both Treehouse Foods and Arqit Quantum 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 Arqit Quantum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Treehouse Foods and Arqit Quantum, you can compare the effects of market volatilities on Treehouse Foods and Arqit Quantum 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 Arqit Quantum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treehouse Foods and Arqit Quantum.

Diversification Opportunities for Treehouse Foods and Arqit Quantum

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Treehouse and Arqit is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Arqit Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arqit Quantum 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 Arqit Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arqit Quantum has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and Arqit Quantum go up and down completely randomly.

Pair Corralation between Treehouse Foods and Arqit Quantum

Considering the 90-day investment horizon Treehouse Foods is expected to generate 0.33 times more return on investment than Arqit Quantum. However, Treehouse Foods is 3.06 times less risky than Arqit Quantum. It trades about 0.05 of its potential returns per unit of risk. Arqit Quantum is currently generating about -0.03 per unit of risk. If you would invest  3,940  in Treehouse Foods on September 2, 2022 and sell it today you would earn a total of  1,003  from holding Treehouse Foods or generate 25.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.6%
ValuesDaily Returns

Treehouse Foods  vs.  Arqit Quantum

 Performance (%) 
       Timeline  
Treehouse Foods 
Treehouse Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Treehouse Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical indicators, Treehouse Foods may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Treehouse Price Channel

Arqit Quantum 
Arqit Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arqit Quantum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Arqit Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Arqit Price Channel

Treehouse Foods and Arqit Quantum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Treehouse Foods and Arqit Quantum

The main advantage of trading using opposite Treehouse Foods and Arqit Quantum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treehouse Foods position performs unexpectedly, Arqit Quantum 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 Arqit Quantum will offset losses from the drop in Arqit Quantum's long position.
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The idea behind Treehouse Foods and Arqit Quantum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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