Correlation Between BG Foods and Premier Foods
Can any of the company-specific risk be diversified away by investing in both BG Foods 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 BG Foods and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BG Foods and Premier Foods Plc, you can compare the effects of market volatilities on BG Foods 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 BG Foods with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Premier Foods.
Diversification Opportunities for BG Foods and Premier Foods
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BGS and Premier is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods 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 BG 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 BG Foods 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 BG Foods i.e., BG Foods and Premier Foods go up and down completely randomly.
Pair Corralation between BG Foods and Premier Foods
Considering the 90-day investment horizon BG Foods is expected to under-perform the Premier Foods. In addition to that, BG Foods is 1.59 times more volatile than Premier Foods Plc. It trades about -0.01 of its total potential returns per unit of risk. Premier Foods Plc is currently generating about 0.11 per unit of volatility. If you would invest 122.00 in Premier Foods Plc on August 31, 2024 and sell it today you would earn a total of 86.00 from holding Premier Foods Plc or generate 70.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 49.09% |
| Values | Daily Returns |
BG Foods vs. Premier Foods Plc
Performance |
| Timeline |
| BG Foods |
| Premier Foods Plc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
BG Foods and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BG Foods and Premier Foods
The main advantage of trading using opposite BG Foods and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods 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.The idea behind BG Foods and Premier Foods Plc 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.| Premier Foods vs. Torque Lifestyle Brands | Premier Foods vs. Naturally Splendid Enterprises | Premier Foods vs. Aryzta AG PK | Premier Foods vs. Premier Foods 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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