Correlation Between Federal Realty and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Federal Realty and Premier Foods 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 Federal Realty and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Realty Investment and Premier Foods PLC, you can compare the effects of market volatilities on Federal Realty and Premier Foods 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 Federal Realty with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and Premier Foods.
Diversification Opportunities for Federal Realty and Premier Foods
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federal and Premier is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC and Federal Realty 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 Federal Realty Investment are associated (or correlated) with Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Federal Realty i.e., Federal Realty and Premier Foods go up and down completely randomly.
Pair Corralation between Federal Realty and Premier Foods
Assuming the 90 days trading horizon Federal Realty Investment is expected to generate 0.9 times more return on investment than Premier Foods. However, Federal Realty Investment is 1.11 times less risky than Premier Foods. It trades about -0.2 of its potential returns per unit of risk. Premier Foods PLC is currently generating about -0.27 per unit of risk. If you would invest 11,036 in Federal Realty Investment on October 20, 2024 and sell it today you would lose (456.00) from holding Federal Realty Investment or give up 4.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Federal Realty Investment vs. Premier Foods PLC
Performance |
| Timeline |
| Federal Realty Investment |
| Premier Foods PLC |
Federal Realty and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Realty and Premier Foods
The main advantage of trading using opposite Federal Realty and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty position performs unexpectedly, Premier Foods 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 Premier Foods will offset losses from the drop in Premier Foods' long position.| Federal Realty vs. G5 Entertainment AB | Federal Realty vs. Intermediate Capital Group | Federal Realty vs. Summit Materials Cl | Federal Realty vs. Live Nation Entertainment |
| Premier Foods vs. Naked Wines plc | Premier Foods vs. Ryanair Holdings plc | Premier Foods vs. Alaska Air Group | Premier Foods vs. Norman Broadbent Plc |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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