Correlation Between PREMIER FOODS and INDIKA ENERGY

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

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

Diversification Opportunities for PREMIER FOODS and INDIKA ENERGY

-0.39

Correlation Coefficient

PREMIER FOODS  INDIKA ENERGY

Very good diversification

The 3 months correlation between PREMIER and INDIKA is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY 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 INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between PREMIER FOODS and INDIKA ENERGY

Assuming the 90 days trading horizon PREMIER FOODS is expected to under-perform the INDIKA ENERGY. But the stock apears to be less risky and, when comparing its historical volatility, PREMIER FOODS is 2.67 times less risky than INDIKA ENERGY. The stock trades about -0.01 of its potential returns per unit of risk. The INDIKA ENERGY is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  7.75  in INDIKA ENERGY on October 18, 2024 and sell it today you would earn a total of  1.45  from holding INDIKA ENERGY or generate 18.71% 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.  INDIKA ENERGY

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

INDIKA ENERGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INDIKA ENERGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INDIKA ENERGY is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PREMIER FOODS and INDIKA ENERGY

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

The idea behind PREMIER FOODS and INDIKA ENERGY 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.