Correlation Between Dupont De and US Foods

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

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

Diversification Opportunities for Dupont De and US Foods

-0.63

Correlation Coefficient

Dupont De  US Foods

Excellent diversification

The 3 months correlation between Dupont and UFH is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and US Foods go up and down completely randomly.

Pair Corralation between Dupont De and US Foods

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the US Foods. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.28 times less risky than US Foods. The stock trades about -0.59 of its potential returns per unit of risk. The US Foods Holding is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest  6,800  in US Foods Holding on October 9, 2024 and sell it today you would lose (400.00) from holding US Foods Holding or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Dupont De Nemours  vs.  US Foods Holding

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

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

US Foods Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, US Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and US Foods

The main advantage of trading using opposite Dupont De and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.