Correlation Between Lamb Weston and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Lamb Weston and Premier 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 Lamb Weston and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamb Weston Holdings and Premier Foods Plc, you can compare the effects of market volatilities on Lamb Weston and Premier 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 Lamb Weston with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamb Weston and Premier Foods.
Diversification Opportunities for Lamb Weston and Premier Foods
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lamb and Premier is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lamb Weston Holdings and Premier Foods Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods Plc and Lamb Weston 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 Lamb Weston Holdings are associated (or correlated) with Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods Plc has no effect on the direction of Lamb Weston i.e., Lamb Weston and Premier Foods go up and down completely randomly.
Pair Corralation between Lamb Weston and Premier Foods
Allowing for the 90-day total investment horizon Lamb Weston Holdings is expected to generate 1.66 times more return on investment than Premier Foods. However, Lamb Weston is 1.66 times more volatile than Premier Foods Plc. It trades about 0.21 of its potential returns per unit of risk. Premier Foods Plc is currently generating about 0.11 per unit of risk. If you would invest 6,085 in Lamb Weston Holdings on August 28, 2024 and sell it today you would earn a total of 1,593 from holding Lamb Weston Holdings or generate 26.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamb Weston Holdings vs. Premier Foods Plc
Performance |
| Timeline |
| Lamb Weston Holdings |
| Premier Foods Plc |
Lamb Weston and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamb Weston and Premier Foods
The main advantage of trading using opposite Lamb Weston and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamb Weston position performs unexpectedly, Premier 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 Premier Foods will offset losses from the drop in Premier Foods' long position.| Lamb Weston vs. Allegion PLC | Lamb Weston vs. Evergy, | Lamb Weston vs. Fortive Corp | Lamb Weston vs. IQVIA Holdings |
| Premier Foods vs. Torque Lifestyle Brands | Premier Foods vs. Naturally Splendid Enterprises | Premier Foods vs. Aryzta AG PK | Premier Foods vs. The A2 Milk |
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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