Correlation Between PREMIER FOODS and J+J SNACK

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

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

Diversification Opportunities for PREMIER FOODS and J+J SNACK

0.59

Correlation Coefficient

PREMIER FOODS  J+J SNACK

Very weak diversification

The 3 months correlation between PREMIER and J+J is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and JJ SNACK FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJ SNACK FOODS 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 J+J SNACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJ SNACK FOODS has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and J+J SNACK go up and down completely randomly.

Pair Corralation between PREMIER FOODS and J+J SNACK

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 1.46 times more return on investment than J+J SNACK. However, PREMIER FOODS is 1.46 times more volatile than JJ SNACK FOODS. It trades about 0.11 of its potential returns per unit of risk. JJ SNACK FOODS is currently generating about 0.11 per unit of risk. If you would invest  214.00  in PREMIER FOODS on September 3, 2024 and sell it today you would earn a total of  22.00  from holding PREMIER FOODS or generate 10.28% return on investment over 90 days.

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

PREMIER FOODS  vs.  JJ SNACK FOODS

PREMIER FOODS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, PREMIER FOODS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

JJ SNACK FOODS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JJ SNACK FOODS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, J+J SNACK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PREMIER FOODS and J+J SNACK

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

The idea behind PREMIER FOODS and JJ SNACK FOODS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.