Correlation Between GoldMining and Premier Foods
Can any of the company-specific risk be diversified away by investing in both GoldMining 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 GoldMining and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoldMining and Premier Foods PLC, you can compare the effects of market volatilities on GoldMining 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 GoldMining with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoldMining and Premier Foods.
Diversification Opportunities for GoldMining and Premier Foods
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GoldMining and Premier is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding GoldMining 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 GoldMining 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 GoldMining 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 GoldMining i.e., GoldMining and Premier Foods go up and down completely randomly.
Pair Corralation between GoldMining and Premier Foods
Assuming the 90 days trading horizon GoldMining is expected to under-perform the Premier Foods. In addition to that, GoldMining is 2.12 times more volatile than Premier Foods PLC. It trades about -0.2 of its total potential returns per unit of risk. Premier Foods PLC is currently generating about -0.15 per unit of volatility. If you would invest 18,600 in Premier Foods PLC on October 10, 2024 and sell it today you would lose (560.00) from holding Premier Foods PLC or give up 3.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 75.0% |
| Values | Daily Returns |
GoldMining vs. Premier Foods PLC
Performance |
| Timeline |
| GoldMining |
| Premier Foods PLC |
GoldMining and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoldMining and Premier Foods
The main advantage of trading using opposite GoldMining and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoldMining 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.| GoldMining vs. Cairn Homes PLC | GoldMining vs. Waste Management | GoldMining vs. Finnair Oyj | GoldMining vs. Wizz Air Holdings |
| Premier Foods vs. Young Cos Brewery | Premier Foods vs. Delta Air Lines | Premier Foods vs. Air Products Chemicals | Premier Foods vs. Universal Display Corp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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