Correlation Between PREMIER FOODS and COMPASS MINERALS

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

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

Diversification Opportunities for PREMIER FOODS and COMPASS MINERALS

0.37

Correlation Coefficient

PREMIER FOODS  COMPASS MINERALS

Weak diversification

The 3 months correlation between PREMIER and COMPASS is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and COMPASS MINERALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS MINERALS 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 COMPASS MINERALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPASS MINERALS has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and COMPASS MINERALS go up and down completely randomly.

Pair Corralation between PREMIER FOODS and COMPASS MINERALS

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.25 times more return on investment than COMPASS MINERALS. However, PREMIER FOODS is 3.99 times less risky than COMPASS MINERALS. It trades about 0.04 of its potential returns per unit of risk. COMPASS MINERALS is currently generating about -0.01 per unit of risk. If you would invest  220.00  in PREMIER FOODS on October 10, 2024 and sell it today you would earn a total of  6.00  from holding PREMIER FOODS or generate 2.73% return on investment over 90 days.

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

PREMIER FOODS  vs.  COMPASS MINERALS

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.

COMPASS MINERALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMPASS MINERALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, COMPASS MINERALS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PREMIER FOODS and COMPASS MINERALS

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

The idea behind PREMIER FOODS and COMPASS MINERALS 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.