Correlation Between DLH Holdings and Premium Catering

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Can any of the company-specific risk be diversified away by investing in both DLH Holdings and Premium Catering 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 DLH Holdings and Premium Catering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DLH Holdings Corp and Premium Catering Limited, you can compare the effects of market volatilities on DLH Holdings and Premium Catering 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 DLH Holdings with a short position of Premium Catering. Check out your portfolio center. Please also check ongoing floating volatility patterns of DLH Holdings and Premium Catering.

Diversification Opportunities for DLH Holdings and Premium Catering

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between DLH and Premium is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding DLH Holdings Corp and Premium Catering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Catering and DLH 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 DLH Holdings Corp are associated (or correlated) with Premium Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Catering has no effect on the direction of DLH Holdings i.e., DLH Holdings and Premium Catering go up and down completely randomly.

Pair Corralation between DLH Holdings and Premium Catering

Given the investment horizon of 90 days DLH Holdings Corp is expected to under-perform the Premium Catering. But the stock apears to be less risky and, when comparing its historical volatility, DLH Holdings Corp is 2.44 times less risky than Premium Catering. The stock trades about -0.05 of its potential returns per unit of risk. The Premium Catering Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  73.00  in Premium Catering Limited on October 6, 2024 and sell it today you would earn a total of  12.00  from holding Premium Catering Limited or generate 16.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy97.62%
ValuesDaily Returns

DLH Holdings Corp  vs.  Premium Catering Limited

 Performance 
       Timeline  
DLH Holdings Corp 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days DLH Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Premium Catering 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Premium Catering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

DLH Holdings and Premium Catering Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DLH Holdings and Premium Catering

The main advantage of trading using opposite DLH Holdings and Premium Catering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DLH Holdings position performs unexpectedly, Premium Catering 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 Premium Catering will offset losses from the drop in Premium Catering's long position.
The idea behind DLH Holdings Corp and Premium Catering Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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