Correlation Between PREMIER FOODS and RCM TECHNOLOGIES

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

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

Diversification Opportunities for PREMIER FOODS and RCM TECHNOLOGIES

0.39

Correlation Coefficient

PREMIER FOODS  RCM TECHNOLOGIES

Weak diversification

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

Pair Corralation between PREMIER FOODS and RCM TECHNOLOGIES

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.44 times more return on investment than RCM TECHNOLOGIES. However, PREMIER FOODS is 2.3 times less risky than RCM TECHNOLOGIES. It trades about 0.11 of its potential returns per unit of risk. RCM TECHNOLOGIES is currently generating about -0.01 per unit of risk. If you would invest  159.00  in PREMIER FOODS on October 6, 2024 and sell it today you would earn a total of  69.00  from holding PREMIER FOODS or generate 43.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.4%
Values	Daily Returns

PREMIER FOODS  vs.  RCM TECHNOLOGIES

PREMIER FOODS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

RCM TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with PREMIER FOODS and RCM TECHNOLOGIES

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

The idea behind PREMIER FOODS and RCM TECHNOLOGIES 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.