Correlation Between PREMIER FOODS and Brockhaus Capital

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

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

Diversification Opportunities for PREMIER FOODS and Brockhaus Capital

-0.32

Correlation Coefficient

PREMIER FOODS  Brockhaus Capital

Very good diversification

The 3 months correlation between PREMIER and Brockhaus is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Brockhaus Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brockhaus Capital 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 Brockhaus Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brockhaus Capital has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Brockhaus Capital go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Brockhaus Capital

Assuming the 90 days trading horizon PREMIER FOODS is expected to under-perform the Brockhaus Capital. But the stock apears to be less risky and, when comparing its historical volatility, PREMIER FOODS is 3.51 times less risky than Brockhaus Capital. The stock trades about -0.05 of its potential returns per unit of risk. The Brockhaus Capital Management is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,270  in Brockhaus Capital Management on October 9, 2024 and sell it today you would earn a total of  80.00  from holding Brockhaus Capital Management or generate 3.52% return on investment over 90 days.

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

PREMIER FOODS  vs.  Brockhaus Capital Management

PREMIER FOODS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Brockhaus Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brockhaus Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PREMIER FOODS and Brockhaus Capital

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

The idea behind PREMIER FOODS and Brockhaus Capital Management 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.