Correlation Between Chiba Bank and PREMIER FOODS

Can any of the company-specific risk be diversified away by investing in both Chiba Bank 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 Chiba Bank and PREMIER FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chiba Bank and PREMIER FOODS, you can compare the effects of market volatilities on Chiba Bank 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 Chiba Bank with a short position of PREMIER FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chiba Bank and PREMIER FOODS.

Diversification Opportunities for Chiba Bank and PREMIER FOODS

0.32

Correlation Coefficient

Chiba Bank  PREMIER FOODS

Weak diversification

The 3 months correlation between Chiba and PREMIER is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Chiba Bank and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS and Chiba Bank 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 Chiba Bank 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 has no effect on the direction of Chiba Bank i.e., Chiba Bank and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Chiba Bank and PREMIER FOODS

Assuming the 90 days horizon Chiba Bank is expected to under-perform the PREMIER FOODS. But the stock apears to be less risky and, when comparing its historical volatility, Chiba Bank is 1.03 times less risky than PREMIER FOODS. The stock trades about -0.3 of its potential returns per unit of risk. The PREMIER FOODS is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  230.00  in PREMIER FOODS on October 12, 2024 and sell it today you would lose (12.00) from holding PREMIER FOODS or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Chiba Bank  vs.  PREMIER FOODS

Chiba Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Chiba Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chiba Bank and PREMIER FOODS

The main advantage of trading using opposite Chiba Bank and PREMIER FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chiba Bank 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's long position.

The idea behind Chiba Bank and PREMIER FOODS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.