Correlation Between PREMIER FOODS and GLADSTONE LAND

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

By analyzing existing cross correlation between PREMIER FOODS and GLADSTONE LAND L 001, you can compare the effects of market volatilities on PREMIER FOODS and GLADSTONE LAND 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 PREMIER FOODS with a short position of GLADSTONE LAND. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and GLADSTONE LAND.

Diversification Opportunities for PREMIER FOODS and GLADSTONE LAND

0.25

Correlation Coefficient

PREMIER FOODS  GLADSTONE LAND

Modest diversification

The 3 months correlation between PREMIER and GLADSTONE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and GLADSTONE LAND L 001 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLADSTONE LAND L and PREMIER FOODS 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 PREMIER FOODS are associated (or correlated) with GLADSTONE LAND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLADSTONE LAND L has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and GLADSTONE LAND go up and down completely randomly.

Pair Corralation between PREMIER FOODS and GLADSTONE LAND

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.79 times more return on investment than GLADSTONE LAND. However, PREMIER FOODS is 1.27 times less risky than GLADSTONE LAND. It trades about -0.01 of its potential returns per unit of risk. GLADSTONE LAND L 001 is currently generating about -0.03 per unit of risk. If you would invest  226.00  in PREMIER FOODS on December 24, 2024 and sell it today you would lose (4.00) from holding PREMIER FOODS or give up 1.77% of portfolio value over 90 days.

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

PREMIER FOODS  vs.  GLADSTONE LAND L 001

PREMIER FOODS

Risk-Adjusted Performance

Very Weak

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

GLADSTONE LAND L

Risk-Adjusted Performance

Very Weak

Over the last 90 days GLADSTONE LAND L 001 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GLADSTONE LAND is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PREMIER FOODS and GLADSTONE LAND

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

The idea behind PREMIER FOODS and GLADSTONE LAND L 001 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.