Correlation Between Colabor and US Foods

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

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

Diversification Opportunities for Colabor and US Foods

-0.8

Correlation Coefficient

Colabor  US Foods

Pay attention - limited upside

The 3 months correlation between Colabor and USFD is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Colabor Group and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding and Colabor 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 Colabor Group are associated (or correlated) with US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of Colabor i.e., Colabor and US Foods go up and down completely randomly.

Pair Corralation between Colabor and US Foods

Assuming the 90 days horizon Colabor Group is expected to generate 1.89 times more return on investment than US Foods. However, Colabor is 1.89 times more volatile than US Foods Holding. It trades about 0.08 of its potential returns per unit of risk. US Foods Holding is currently generating about -0.05 per unit of risk. If you would invest  65.00  in Colabor Group on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Colabor Group or generate 10.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Colabor Group  vs.  US Foods Holding

Colabor Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Colabor Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Colabor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

US Foods Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days US Foods Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, US 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 Colabor and US Foods

The main advantage of trading using opposite Colabor and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colabor position performs unexpectedly, US 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 US Foods will offset losses from the drop in US Foods' long position.

The idea behind Colabor Group and US Foods Holding 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.