Correlation Between Catena Media and Premier Foods

Can any of the company-specific risk be diversified away by investing in both Catena Media 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 Catena Media and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Catena Media PLC and Premier Foods PLC, you can compare the effects of market volatilities on Catena Media 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 Catena Media with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Catena Media and Premier Foods.

Diversification Opportunities for Catena Media and Premier Foods

0.34

Correlation Coefficient

Catena Media  Premier Foods

Weak diversification

The 3 months correlation between Catena and Premier is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Catena Media PLC 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 Catena Media 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 Catena Media PLC 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 Catena Media i.e., Catena Media and Premier Foods go up and down completely randomly.

Pair Corralation between Catena Media and Premier Foods

Assuming the 90 days trading horizon Catena Media PLC is expected to generate 2.6 times more return on investment than Premier Foods. However, Catena Media is 2.6 times more volatile than Premier Foods PLC. It trades about -0.05 of its potential returns per unit of risk. Premier Foods PLC is currently generating about -0.28 per unit of risk. If you would invest  419.00  in Catena Media PLC on October 20, 2024 and sell it today you would lose (16.00) from holding Catena Media PLC or give up 3.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Catena Media PLC  vs.  Premier Foods PLC

Catena Media PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catena Media PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Premier Foods PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Foods PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Catena Media and Premier Foods

The main advantage of trading using opposite Catena Media and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catena Media 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.

The idea behind Catena Media PLC and Premier Foods PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.