Correlation Between AMCON Distributing and US Foods

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

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

Diversification Opportunities for AMCON Distributing and US Foods

0.16

Correlation Coefficient

AMCON Distributing  US Foods

Average diversification

The 3 months correlation between AMCON and USFD is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing 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 AMCON Distributing 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 AMCON Distributing 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 AMCON Distributing i.e., AMCON Distributing and US Foods go up and down completely randomly.

Pair Corralation between AMCON Distributing and US Foods

Considering the 90-day investment horizon AMCON Distributing is expected to under-perform the US Foods. In addition to that, AMCON Distributing is 3.15 times more volatile than US Foods Holding. It trades about -0.03 of its total potential returns per unit of risk. US Foods Holding is currently generating about -0.04 per unit of volatility. If you would invest  6,817  in US Foods Holding on December 27, 2024 and sell it today you would lose (256.00) from holding US Foods Holding or give up 3.76% of portfolio value over 90 days.

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

AMCON Distributing  vs.  US Foods Holding

AMCON Distributing

Risk-Adjusted Performance

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 AMCON Distributing and US Foods

The main advantage of trading using opposite AMCON Distributing and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMCON Distributing 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 AMCON Distributing 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.