Correlation Between INTER CARS and Premier Foods

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

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

Diversification Opportunities for INTER CARS and Premier Foods

-0.3

Correlation Coefficient

INTER CARS  Premier Foods

Very good diversification

The 3 months correlation between INTER and Premier is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA 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 INTER CARS 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 INTER CARS SA 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 INTER CARS i.e., INTER CARS and Premier Foods go up and down completely randomly.

Pair Corralation between INTER CARS and Premier Foods

Assuming the 90 days horizon INTER CARS SA is expected to generate 1.03 times more return on investment than Premier Foods. However, INTER CARS is 1.03 times more volatile than Premier Foods PLC. It trades about 0.01 of its potential returns per unit of risk. Premier Foods PLC is currently generating about -0.1 per unit of risk. If you would invest  14,040  in INTER CARS SA on December 4, 2024 and sell it today you would lose (20.00) from holding INTER CARS SA or give up 0.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

INTER CARS SA  vs.  Premier Foods PLC

INTER CARS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, INTER CARS reported solid returns over the last few months and may actually be approaching a breakup point.

Premier Foods PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Foods PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Premier Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INTER CARS and Premier Foods

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

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .