Correlation Between Performance Food and Constellation Software
Can any of the company-specific risk be diversified away by investing in both Performance Food and Constellation Software 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 Constellation Software 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 Constellation Software, you can compare the effects of market volatilities on Performance Food and Constellation Software 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 Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Constellation Software.
Diversification Opportunities for Performance Food and Constellation Software
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Performance and Constellation is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Performance Food i.e., Performance Food and Constellation Software go up and down completely randomly.
Pair Corralation between Performance Food and Constellation Software
Assuming the 90 days trading horizon Performance Food Group is expected to generate 1.25 times more return on investment than Constellation Software. However, Performance Food is 1.25 times more volatile than Constellation Software. It trades about 0.24 of its potential returns per unit of risk. Constellation Software is currently generating about 0.18 per unit of risk. If you would invest 7,100 in Performance Food Group on September 3, 2024 and sell it today you would earn a total of 1,150 from holding Performance Food Group or generate 16.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Performance Food Group vs. Constellation Software
Performance |
| Timeline |
| Performance Food |
| Constellation Software |
Performance Food and Constellation Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Constellation Software
The main advantage of trading using opposite Performance Food and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food position performs unexpectedly, Constellation Software 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 Constellation Software will offset losses from the drop in Constellation Software's long position.| Performance Food vs. China BlueChemical | Performance Food vs. AIR PRODCHEMICALS | Performance Food vs. Siamgas And Petrochemicals | Performance Food vs. Sanyo Chemical Industries |
| Constellation Software vs. Performance Food Group | Constellation Software vs. GRIFFIN MINING LTD | Constellation Software vs. PT Indofood Sukses | Constellation Software vs. Tyson Foods |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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