Correlation Between Premier Investments and Collins Foods
Can any of the company-specific risk be diversified away by investing in both Premier Investments and Collins 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 Premier Investments and Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Investments and Collins Foods, you can compare the effects of market volatilities on Premier Investments and Collins 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 Premier Investments with a short position of Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Investments and Collins Foods.
Diversification Opportunities for Premier Investments and Collins Foods
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Premier and Collins is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Premier Investments and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and Premier Investments 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 Investments are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Premier Investments i.e., Premier Investments and Collins Foods go up and down completely randomly.
Pair Corralation between Premier Investments and Collins Foods
Assuming the 90 days trading horizon Premier Investments is expected to generate 0.9 times more return on investment than Collins Foods. However, Premier Investments is 1.11 times less risky than Collins Foods. It trades about 0.06 of its potential returns per unit of risk. Collins Foods is currently generating about 0.03 per unit of risk. If you would invest 2,321 in Premier Investments on September 3, 2024 and sell it today you would earn a total of 1,148 from holding Premier Investments or generate 49.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Premier Investments vs. Collins Foods
Performance |
| Timeline |
| Premier Investments |
| Collins Foods |
Premier Investments and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Investments and Collins Foods
The main advantage of trading using opposite Premier Investments and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Investments position performs unexpectedly, Collins 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| Premier Investments vs. Westpac Banking | Premier Investments vs. Champion Iron | Premier Investments vs. iShares Global Healthcare | Premier Investments vs. Peel Mining |
| Collins Foods vs. Westpac Banking | Collins Foods vs. Champion Iron | Collins Foods vs. iShares Global Healthcare | Collins Foods vs. Peel 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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