Correlation Between Federal Home and US FOODS
Can any of the company-specific risk be diversified away by investing in both Federal Home and US 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 Federal Home and US FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Home Loan and US FOODS HOLDING, you can compare the effects of market volatilities on Federal Home and US 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 Federal Home with a short position of US FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and US FOODS.
Diversification Opportunities for Federal Home and US FOODS
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federal and UFH is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING and Federal Home 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 Federal Home Loan are associated (or correlated) with US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Federal Home i.e., Federal Home and US FOODS go up and down completely randomly.
Pair Corralation between Federal Home and US FOODS
Assuming the 90 days horizon Federal Home Loan is expected to generate 5.71 times more return on investment than US FOODS. However, Federal Home is 5.71 times more volatile than US FOODS HOLDING. It trades about 0.48 of its potential returns per unit of risk. US FOODS HOLDING is currently generating about 0.45 per unit of risk. If you would invest 116.00 in Federal Home Loan on September 2, 2024 and sell it today you would earn a total of 182.00 from holding Federal Home Loan or generate 156.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Home Loan vs. US FOODS HOLDING
Performance |
| Timeline |
| Federal Home Loan |
| US FOODS HOLDING |
Federal Home and US FOODS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Home and US FOODS
The main advantage of trading using opposite Federal Home and US FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Home position performs unexpectedly, US 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 US FOODS will offset losses from the drop in US FOODS's long position.| Federal Home vs. Superior Plus Corp | Federal Home vs. NMI Holdings | Federal Home vs. Origin Agritech | Federal Home vs. SIVERS SEMICONDUCTORS AB |
| US FOODS vs. OAKTRSPECLENDNEW | US FOODS vs. Regions Financial | US FOODS vs. Cardinal Health | US FOODS vs. Bausch Health Companies |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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