Correlation Between PREMIER FOODS and Power Nickel

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

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

Diversification Opportunities for PREMIER FOODS and Power Nickel

-0.55

Correlation Coefficient

PREMIER FOODS  Power Nickel

Excellent diversification

The 3 months correlation between PREMIER and Power is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Power Nickel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Nickel 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 Power Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Nickel has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Power Nickel go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Power Nickel

Assuming the 90 days trading horizon PREMIER FOODS is expected to under-perform the Power Nickel. But the stock apears to be less risky and, when comparing its historical volatility, PREMIER FOODS is 3.77 times less risky than Power Nickel. The stock trades about -0.04 of its potential returns per unit of risk. The Power Nickel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Power Nickel on October 25, 2024 and sell it today you would earn a total of  19.00  from holding Power Nickel or generate 35.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

PREMIER FOODS  vs.  Power Nickel

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 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.

Power Nickel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Nickel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Power Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PREMIER FOODS and Power Nickel

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

The idea behind PREMIER FOODS and Power Nickel 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.