Correlation Between Premier Foods and Monks Investment
Can any of the company-specific risk be diversified away by investing in both Premier Foods and Monks Investment 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 Monks Investment 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 Monks Investment Trust, you can compare the effects of market volatilities on Premier Foods and Monks Investment 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 Monks Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Monks Investment.
Diversification Opportunities for Premier Foods and Monks Investment
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Premier and Monks is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment Trust 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Premier Foods i.e., Premier Foods and Monks Investment go up and down completely randomly.
Pair Corralation between Premier Foods and Monks Investment
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 1.38 times more return on investment than Monks Investment. However, Premier Foods is 1.38 times more volatile than Monks Investment Trust. It trades about 0.12 of its potential returns per unit of risk. Monks Investment Trust is currently generating about 0.11 per unit of risk. If you would invest 12,844 in Premier Foods PLC on September 14, 2024 and sell it today you would earn a total of 6,056 from holding Premier Foods PLC or generate 47.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier Foods PLC vs. Monks Investment Trust
Performance |
| Timeline |
| Premier Foods PLC |
| Monks Investment Trust |
Premier Foods and Monks Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Monks Investment
The main advantage of trading using opposite Premier Foods and Monks Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, Monks Investment 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 Monks Investment will offset losses from the drop in Monks Investment'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 |
| Monks Investment vs. Fevertree Drinks Plc | Monks Investment vs. AfriTin Mining | Monks Investment vs. GoldMining | Monks Investment vs. Griffin Mining |
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 Stocks Directory module to find actively traded stocks across global markets.
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