Correlation Between PREMIER FOODS and CompuGroup Medical
Can any of the company-specific risk be diversified away by investing in both PREMIER FOODS and CompuGroup Medical 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 CompuGroup Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PREMIER FOODS and CompuGroup Medical SE, you can compare the effects of market volatilities on PREMIER FOODS and CompuGroup Medical 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 CompuGroup Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of PREMIER FOODS and CompuGroup Medical.
Diversification Opportunities for PREMIER FOODS and CompuGroup Medical
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PREMIER and CompuGroup is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and CompuGroup Medical SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompuGroup Medical 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 CompuGroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompuGroup Medical has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and CompuGroup Medical go up and down completely randomly.
Pair Corralation between PREMIER FOODS and CompuGroup Medical
Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.37 times more return on investment than CompuGroup Medical. However, PREMIER FOODS is 2.68 times less risky than CompuGroup Medical. It trades about 0.11 of its potential returns per unit of risk. CompuGroup Medical SE is currently generating about -0.02 per unit of risk. If you would invest 153.00 in PREMIER FOODS on October 5, 2024 and sell it today you would earn a total of 73.00 from holding PREMIER FOODS or generate 47.71% 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. CompuGroup Medical SE
Performance |
Timeline |
PREMIER FOODS |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
CompuGroup Medical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
PREMIER FOODS and CompuGroup Medical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with PREMIER FOODS and CompuGroup Medical
The main advantage of trading using opposite PREMIER FOODS and CompuGroup Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS position performs unexpectedly, CompuGroup Medical 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 CompuGroup Medical will offset losses from the drop in CompuGroup Medical's long position.The idea behind PREMIER FOODS and CompuGroup Medical SE 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.Check out your portfolio center.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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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