Correlation Between PREMIER FOODS and STHREE PLC
Can any of the company-specific risk be diversified away by investing in both PREMIER FOODS and STHREE PLC 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 PREMIER FOODS and STHREE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PREMIER FOODS and STHREE PLC LS, you can compare the effects of market volatilities on PREMIER FOODS and STHREE PLC 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 PREMIER FOODS with a short position of STHREE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and STHREE PLC.
Diversification Opportunities for PREMIER FOODS and STHREE PLC
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PREMIER and STHREE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and STHREE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STHREE PLC LS and PREMIER 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 PREMIER FOODS are associated (or correlated) with STHREE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STHREE PLC LS has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and STHREE PLC go up and down completely randomly.
Pair Corralation between PREMIER FOODS and STHREE PLC
Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.84 times more return on investment than STHREE PLC. However, PREMIER FOODS is 1.19 times less risky than STHREE PLC. It trades about 0.12 of its potential returns per unit of risk. STHREE PLC LS is currently generating about -0.01 per unit of risk. If you would invest 153.00 in PREMIER FOODS on September 14, 2024 and sell it today you would earn a total of 77.00 from holding PREMIER FOODS or generate 50.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
PREMIER FOODS vs. STHREE PLC LS
Performance |
| Timeline |
| PREMIER FOODS |
| STHREE PLC LS |
PREMIER FOODS and STHREE PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PREMIER FOODS and STHREE PLC
The main advantage of trading using opposite PREMIER FOODS and STHREE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS position performs unexpectedly, STHREE PLC 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 STHREE PLC will offset losses from the drop in STHREE PLC's long position.| PREMIER FOODS vs. Federal Agricultural Mortgage | PREMIER FOODS vs. DAIRY FARM INTL | PREMIER FOODS vs. Sterling Construction | PREMIER FOODS vs. CITY OFFICE REIT |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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