Correlation Between Premier Foods and Fannie Mae
Can any of the company-specific risk be diversified away by investing in both Premier Foods and Fannie Mae 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 Fannie Mae 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 Fannie Mae, you can compare the effects of market volatilities on Premier Foods and Fannie Mae 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 Fannie Mae. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Fannie Mae.
Diversification Opportunities for Premier Foods and Fannie Mae
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Premier and Fannie is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae 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 Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Premier Foods i.e., Premier Foods and Fannie Mae go up and down completely randomly.
Pair Corralation between Premier Foods and Fannie Mae
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.19 times more return on investment than Fannie Mae. However, Premier Foods PLC is 5.29 times less risky than Fannie Mae. It trades about -0.01 of its potential returns per unit of risk. Fannie Mae is currently generating about -0.05 per unit of risk. If you would invest 18,900 in Premier Foods PLC on September 15, 2024 and sell it today you would lose (80.00) from holding Premier Foods PLC or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Premier Foods PLC vs. Fannie Mae
Performance |
| Timeline |
| Premier Foods PLC |
| Fannie Mae |
Premier Foods and Fannie Mae Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Fannie Mae
The main advantage of trading using opposite Premier Foods and Fannie Mae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, Fannie Mae 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 Fannie Mae will offset losses from the drop in Fannie Mae's long position.| Premier Foods vs. Samsung Electronics Co | Premier Foods vs. Samsung Electronics Co | Premier Foods vs. Hyundai Motor | Premier Foods vs. Toyota Motor Corp |
| Fannie Mae vs. Samsung Electronics Co | Fannie Mae vs. Samsung Electronics Co | Fannie Mae vs. Hyundai Motor | Fannie Mae vs. Reliance Industries Ltd |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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