Correlation Between Smithson Investment and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Smithson Investment 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 Smithson Investment and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Premier Foods PLC, you can compare the effects of market volatilities on Smithson Investment 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 Smithson Investment with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Premier Foods.
Diversification Opportunities for Smithson Investment and Premier Foods
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Smithson and Premier is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust 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 Smithson Investment 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 Smithson Investment Trust 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 Smithson Investment i.e., Smithson Investment and Premier Foods go up and down completely randomly.
Pair Corralation between Smithson Investment and Premier Foods
Assuming the 90 days trading horizon Smithson Investment is expected to generate 1.98 times less return on investment than Premier Foods. But when comparing it to its historical volatility, Smithson Investment Trust is 1.24 times less risky than Premier Foods. It trades about 0.04 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 16,901 in Premier Foods PLC on August 24, 2024 and sell it today you would earn a total of 1,519 from holding Premier Foods PLC or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smithson Investment Trust vs. Premier Foods PLC
Performance |
| Timeline |
| Smithson Investment Trust |
| Premier Foods PLC |
Smithson Investment and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Premier Foods
The main advantage of trading using opposite Smithson Investment and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment 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.| Smithson Investment vs. Associated British Foods | Smithson Investment vs. Flowtech Fluidpower plc | Smithson Investment vs. Monster Beverage Corp | Smithson Investment vs. LPKF Laser Electronics |
| Premier Foods vs. Neometals | Premier Foods vs. Coor Service Management | Premier Foods vs. Sancus Lending Group | Premier Foods vs. Aeorema Communications Plc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |