Correlation Between Premier Foods and HomeToGo
Can any of the company-specific risk be diversified away by investing in both Premier Foods and HomeToGo 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 HomeToGo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and HomeToGo SE, you can compare the effects of market volatilities on Premier Foods and HomeToGo 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 HomeToGo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and HomeToGo.
Diversification Opportunities for Premier Foods and HomeToGo
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Premier and HomeToGo is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE 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 PLC are associated (or correlated) with HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of Premier Foods i.e., Premier Foods and HomeToGo go up and down completely randomly.
Pair Corralation between Premier Foods and HomeToGo
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.53 times more return on investment than HomeToGo. However, Premier Foods PLC is 1.9 times less risky than HomeToGo. It trades about 0.1 of its potential returns per unit of risk. HomeToGo SE is currently generating about -0.01 per unit of risk. If you would invest 150.00 in Premier Foods PLC on September 15, 2024 and sell it today you would earn a total of 76.00 from holding Premier Foods PLC or generate 50.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier Foods PLC vs. HomeToGo SE
Performance |
| Timeline |
| Premier Foods PLC |
| HomeToGo SE |
Premier Foods and HomeToGo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and HomeToGo
The main advantage of trading using opposite Premier Foods and HomeToGo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, HomeToGo 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 HomeToGo will offset losses from the drop in HomeToGo's long position.| Premier Foods vs. HomeToGo SE | Premier Foods vs. Sunny Optical Technology | Premier Foods vs. Haier Smart Home | Premier Foods vs. Focus Home Interactive |
| HomeToGo vs. Tencent Holdings | HomeToGo vs. Superior Plus Corp | HomeToGo vs. SIVERS SEMICONDUCTORS AB | HomeToGo vs. NorAm Drilling AS |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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