Correlation Between Performance Food and Safety Insurance
Can any of the company-specific risk be diversified away by investing in both Performance Food and Safety Insurance 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 Performance Food and Safety Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Safety Insurance Group, you can compare the effects of market volatilities on Performance Food and Safety Insurance 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 Performance Food with a short position of Safety Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Safety Insurance.
Diversification Opportunities for Performance Food and Safety Insurance
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Performance and Safety is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance and Performance Food 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 Performance Food Group are associated (or correlated) with Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Performance Food i.e., Performance Food and Safety Insurance go up and down completely randomly.
Pair Corralation between Performance Food and Safety Insurance
Assuming the 90 days trading horizon Performance Food is expected to generate 1.3 times less return on investment than Safety Insurance. But when comparing it to its historical volatility, Performance Food Group is 1.11 times less risky than Safety Insurance. It trades about 0.28 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 7,200 in Safety Insurance Group on August 31, 2024 and sell it today you would earn a total of 950.00 from holding Safety Insurance Group or generate 13.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Performance Food Group vs. Safety Insurance Group
Performance |
| Timeline |
| Performance Food |
| Safety Insurance |
Performance Food and Safety Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Safety Insurance
The main advantage of trading using opposite Performance Food and Safety Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food position performs unexpectedly, Safety Insurance 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 Safety Insurance will offset losses from the drop in Safety Insurance's long position.| Performance Food vs. Apple Inc | Performance Food vs. Apple Inc | Performance Food vs. Apple Inc | Performance Food vs. Apple Inc |
| Safety Insurance vs. Chuangs China Investments | Safety Insurance vs. UNIVERSAL MUSIC GROUP | Safety Insurance vs. Gladstone Investment | Safety Insurance vs. BURLINGTON STORES |
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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