Correlation Between Premier Foods and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Premier Foods and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Premier Foods and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Ross Stores.
Diversification Opportunities for Premier Foods and Ross Stores
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Premier and Ross is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Premier Foods i.e., Premier Foods and Ross Stores go up and down completely randomly.
Pair Corralation between Premier Foods and Ross Stores
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.77 times more return on investment than Ross Stores. However, Premier Foods PLC is 1.29 times less risky than Ross Stores. It trades about -0.07 of its potential returns per unit of risk. Ross Stores is currently generating about -0.11 per unit of risk. If you would invest 18,480 in Premier Foods PLC on October 11, 2024 and sell it today you would lose (280.00) from holding Premier Foods PLC or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Premier Foods PLC vs. Ross Stores
Performance |
| Timeline |
| Premier Foods PLC |
| Ross Stores |
Premier Foods and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Ross Stores
The main advantage of trading using opposite Premier Foods and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Premier Foods vs. Global Net Lease | Premier Foods vs. URU Metals | Premier Foods vs. First Class Metals | Premier Foods vs. Air Products Chemicals |
| Ross Stores vs. Odfjell Drilling | Ross Stores vs. Europa Metals | Ross Stores vs. AMG Advanced Metallurgical | Ross Stores vs. Adriatic Metals |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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