Correlation Between Premier Foods and Sabra Health
Can any of the company-specific risk be diversified away by investing in both Premier Foods and Sabra Health 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 Sabra Health 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 Sabra Health Care, you can compare the effects of market volatilities on Premier Foods and Sabra Health 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 Sabra Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Sabra Health.
Diversification Opportunities for Premier Foods and Sabra Health
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Premier and Sabra is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Sabra Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabra Health Care 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 Sabra Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabra Health Care has no effect on the direction of Premier Foods i.e., Premier Foods and Sabra Health go up and down completely randomly.
Pair Corralation between Premier Foods and Sabra Health
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.89 times more return on investment than Sabra Health. However, Premier Foods PLC is 1.12 times less risky than Sabra Health. It trades about 0.09 of its potential returns per unit of risk. Sabra Health Care is currently generating about 0.08 per unit of risk. If you would invest 120.00 in Premier Foods PLC on September 3, 2024 and sell it today you would earn a total of 108.00 from holding Premier Foods PLC or generate 90.0% 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. Sabra Health Care
Performance |
| Timeline |
| Premier Foods PLC |
| Sabra Health Care |
Premier Foods and Sabra Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Sabra Health
The main advantage of trading using opposite Premier Foods and Sabra Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, Sabra Health 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 Sabra Health will offset losses from the drop in Sabra Health's long position.| Premier Foods vs. Nestl SA | Premier Foods vs. Kraft Heinz Co | Premier Foods vs. General Mills | Premier Foods vs. Kellogg Company |
| Sabra Health vs. THAI BEVERAGE | Sabra Health vs. Lifeway Foods | Sabra Health vs. Cal Maine Foods | Sabra Health vs. SENECA FOODS A |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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