Correlation Between PREMIER FOODS and Trupanion

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

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

Diversification Opportunities for PREMIER FOODS and Trupanion

0.75

Correlation Coefficient

PREMIER FOODS  Trupanion

Poor diversification

The 3 months correlation between PREMIER and Trupanion is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of PREMIER FOODS i.e., PREMIER FOODS and Trupanion go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Trupanion

Assuming the 90 days trading horizon PREMIER FOODS is expected to generate 0.35 times more return on investment than Trupanion. However, PREMIER FOODS is 2.85 times less risky than Trupanion. It trades about 0.21 of its potential returns per unit of risk. Trupanion is currently generating about 0.02 per unit of risk. If you would invest  218.00  in PREMIER FOODS on September 18, 2024 and sell it today you would earn a total of  10.00  from holding PREMIER FOODS or generate 4.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

PREMIER FOODS  vs.  Trupanion

PREMIER FOODS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Trupanion

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PREMIER FOODS and Trupanion

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

The idea behind PREMIER FOODS and Trupanion 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.