Correlation Between Pets At and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Pets At 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 Pets At and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pets at Home and Premier Foods PLC, you can compare the effects of market volatilities on Pets At 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 Pets At with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pets At and Premier Foods.
Diversification Opportunities for Pets At and Premier Foods
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Pets and Premier is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pets at Home 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 Pets At 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 Pets at Home 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 Pets At i.e., Pets At and Premier Foods go up and down completely randomly.
Pair Corralation between Pets At and Premier Foods
Assuming the 90 days trading horizon Pets at Home is expected to under-perform the Premier Foods. In addition to that, Pets At is 1.6 times more volatile than Premier Foods PLC. It trades about -0.04 of its total potential returns per unit of risk. Premier Foods PLC is currently generating about 0.13 per unit of volatility. If you would invest 11,478 in Premier Foods PLC on August 29, 2024 and sell it today you would earn a total of 7,322 from holding Premier Foods PLC or generate 63.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pets at Home vs. Premier Foods PLC
Performance |
| Timeline |
| Pets at Home |
| Premier Foods PLC |
Pets At and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pets At and Premier Foods
The main advantage of trading using opposite Pets At and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pets At 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.| Pets At vs. Ondine Biomedical | Pets At vs. Europa Metals | Pets At vs. Lendinvest PLC | Pets At vs. Neometals |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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