Correlation Between PREMIER FOODS and Addus HomeCare

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

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

Diversification Opportunities for PREMIER FOODS and Addus HomeCare

0.17

Correlation Coefficient

PREMIER FOODS  Addus HomeCare

Average diversification

The 3 months correlation between PREMIER and Addus is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Addus HomeCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addus HomeCare 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 Addus HomeCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addus HomeCare has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Addus HomeCare go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Addus HomeCare

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.62 times more return on investment than Addus HomeCare. However, PREMIER FOODS is 1.6 times less risky than Addus HomeCare. It trades about 0.12 of its potential returns per unit of risk. Addus HomeCare is currently generating about 0.0 per unit of risk. If you would invest  212.00  in PREMIER FOODS on September 4, 2024 and sell it today you would earn a total of  22.00  from holding PREMIER FOODS or generate 10.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

PREMIER FOODS  vs.  Addus HomeCare

PREMIER FOODS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, PREMIER FOODS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Addus HomeCare

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PREMIER FOODS and Addus HomeCare

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

The idea behind PREMIER FOODS and Addus HomeCare 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.