Correlation Between Dairy Farm and Performance Food
Can any of the company-specific risk be diversified away by investing in both Dairy Farm 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 Dairy Farm and Performance Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and Performance Food Group, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Performance Food.
Diversification Opportunities for Dairy Farm and Performance Food
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dairy and Performance is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Performance Food go up and down completely randomly.
Pair Corralation between Dairy Farm and Performance Food
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.03 times more return on investment than Performance Food. However, Dairy Farm is 1.03 times more volatile than Performance Food Group. It trades about 0.36 of its potential returns per unit of risk. Performance Food Group is currently generating about 0.3 per unit of risk. If you would invest 206.00 in Dairy Farm International on August 29, 2024 and sell it today you would earn a total of 28.00 from holding Dairy Farm International or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. Performance Food Group
Performance |
| Timeline |
| Dairy Farm International |
| Performance Food |
Dairy Farm and Performance Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Performance Food
The main advantage of trading using opposite Dairy Farm and Performance Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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.| Dairy Farm vs. TESCO PLC LS 0633333 | Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. NMI Holdings | Dairy Farm vs. SIVERS SEMICONDUCTORS AB |
| Performance Food vs. Mitsubishi Materials | Performance Food vs. Eagle Materials | Performance Food vs. Summit Materials | Performance Food vs. Iridium Communications |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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