Correlation Between China Feihe and Premier Foods
Can any of the company-specific risk be diversified away by investing in both China Feihe 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 China Feihe and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Feihe Limited and Premier Foods Plc, you can compare the effects of market volatilities on China Feihe 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 China Feihe with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Feihe and Premier Foods.
Diversification Opportunities for China Feihe and Premier Foods
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Premier is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding China Feihe Limited 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 China Feihe 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 China Feihe Limited 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 China Feihe i.e., China Feihe and Premier Foods go up and down completely randomly.
Pair Corralation between China Feihe and Premier Foods
Assuming the 90 days horizon China Feihe Limited is expected to under-perform the Premier Foods. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Feihe Limited is 1.37 times less risky than Premier Foods. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Premier Foods Plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,139 in Premier Foods Plc on November 3, 2024 and sell it today you would earn a total of 76.00 from holding Premier Foods Plc or generate 6.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Feihe Limited vs. Premier Foods Plc
Performance |
| Timeline |
| China Feihe Limited |
| Premier Foods Plc |
China Feihe and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Feihe and Premier Foods
The main advantage of trading using opposite China Feihe and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Feihe 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.| China Feihe vs. WH Group Limited | China Feihe vs. BG Foods | China Feihe vs. JBS SA | China Feihe vs. Marfrig Global Foods |
| Premier Foods vs. Torque Lifestyle Brands | Premier Foods vs. Naturally Splendid Enterprises | Premier Foods vs. Aryzta AG PK | Premier Foods vs. The A2 Milk |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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