Correlation Between Crown Holdings and PREMIER FOODS

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

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

Diversification Opportunities for Crown Holdings and PREMIER FOODS

0.26

Correlation Coefficient

Crown Holdings  PREMIER FOODS

Modest diversification

The 3 months correlation between Crown and PREMIER is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Crown Holdings and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS and Crown Holdings 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 Crown Holdings 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 Crown Holdings i.e., Crown Holdings and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Crown Holdings and PREMIER FOODS

Assuming the 90 days horizon Crown Holdings is expected to generate 2.07 times less return on investment than PREMIER FOODS. In addition to that, Crown Holdings is 1.01 times more volatile than PREMIER FOODS. It trades about 0.05 of its total potential returns per unit of risk. PREMIER FOODS is currently generating about 0.11 per unit of volatility. If you would invest  195.00  in PREMIER FOODS on September 23, 2024 and sell it today you would earn a total of  37.00  from holding PREMIER FOODS or generate 18.97% return on investment over 90 days.

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

Crown Holdings  vs.  PREMIER FOODS

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

PREMIER FOODS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, PREMIER FOODS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crown Holdings and PREMIER FOODS

The main advantage of trading using opposite Crown Holdings and PREMIER FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown Holdings 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 Crown Holdings 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.