Correlation Between PREMIER FOODS and Danaher

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

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

Diversification Opportunities for PREMIER FOODS and Danaher

-0.09

Correlation Coefficient

PREMIER FOODS  Danaher

Good diversification

The 3 months correlation between PREMIER and Danaher is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Danaher go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Danaher

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.83 times more return on investment than Danaher. However, PREMIER FOODS is 1.21 times less risky than Danaher. It trades about -0.01 of its potential returns per unit of risk. Danaher is currently generating about -0.1 per unit of risk. If you would invest  226.00  in PREMIER FOODS on December 25, 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

PREMIER FOODS  vs.  Danaher

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Danaher

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danaher has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PREMIER FOODS and Danaher

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

The idea behind PREMIER FOODS and Danaher 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.