Correlation Between Food Life and Performance Food
Can any of the company-specific risk be diversified away by investing in both Food Life and Performance Food 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 Food Life and Performance Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and Performance Food Group, you can compare the effects of market volatilities on Food Life and Performance Food 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 Food Life with a short position of Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Performance Food.
Diversification Opportunities for Food Life and Performance Food
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Food and Performance is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food and Food Life 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 Food Life Companies are associated (or correlated) with Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Food Life i.e., Food Life and Performance Food go up and down completely randomly.
Pair Corralation between Food Life and Performance Food
Assuming the 90 days horizon Food Life is expected to generate 3.75 times less return on investment than Performance Food. In addition to that, Food Life is 1.47 times more volatile than Performance Food Group. It trades about 0.02 of its total potential returns per unit of risk. Performance Food Group is currently generating about 0.09 per unit of volatility. If you would invest 5,100 in Performance Food Group on August 31, 2024 and sell it today you would earn a total of 3,200 from holding Performance Food Group or generate 62.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.74% |
| Values | Daily Returns |
Food Life Companies vs. Performance Food Group
Performance |
| Timeline |
| Food Life Companies |
| Performance Food |
Food Life and Performance Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and Performance Food
The main advantage of trading using opposite Food Life and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life position performs unexpectedly, Performance Food 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 Performance Food will offset losses from the drop in Performance Food's long position.| Food Life vs. McDonalds | Food Life vs. Starbucks | Food Life vs. Compass Group PLC | Food Life vs. Yum Brands |
| Performance Food vs. Apple Inc | Performance Food vs. Apple Inc | Performance Food vs. Apple Inc | Performance Food vs. Apple Inc |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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