Correlation Between PREMIER FOODS and Performance Food

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

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

Diversification Opportunities for PREMIER FOODS and Performance Food

0.6

Correlation Coefficient

PREMIER FOODS  Performance Food

Poor diversification

The 3 months correlation between PREMIER and Performance is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food 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 Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Performance Food go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Performance Food

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.92 times more return on investment than Performance Food. However, PREMIER FOODS is 1.09 times less risky than Performance Food. It trades about 0.11 of its potential returns per unit of risk. Performance Food Group is currently generating about 0.08 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	Significant
Accuracy	100.0%
Values	Daily Returns

PREMIER FOODS  vs.  Performance Food Group

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Modest

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 uncertain technical and fundamental indicators, PREMIER FOODS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Performance Food

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Performance Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Performance Food unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PREMIER FOODS and Performance Food

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

The idea behind PREMIER FOODS and Performance Food Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.