Correlation Between Premier Foods and COMBA TELECOM

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Can any of the company-specific risk be diversified away by investing in both Premier Foods and COMBA TELECOM 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 COMBA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and COMBA TELECOM SYST, you can compare the effects of market volatilities on Premier Foods and COMBA TELECOM 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 COMBA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and COMBA TELECOM.

Diversification Opportunities for Premier Foods and COMBA TELECOM

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Premier and COMBA is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and COMBA TELECOM SYST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMBA TELECOM SYST 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 PLC are associated (or correlated) with COMBA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMBA TELECOM SYST has no effect on the direction of Premier Foods i.e., Premier Foods and COMBA TELECOM go up and down completely randomly.

Pair Corralation between Premier Foods and COMBA TELECOM

Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.75 times more return on investment than COMBA TELECOM. However, Premier Foods PLC is 1.33 times less risky than COMBA TELECOM. It trades about 0.09 of its potential returns per unit of risk. COMBA TELECOM SYST is currently generating about -0.01 per unit of risk. If you would invest  119.00  in Premier Foods PLC on September 5, 2024 and sell it today you would earn a total of  113.00  from holding Premier Foods PLC or generate 94.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Premier Foods PLC  vs.  COMBA TELECOM SYST

 Performance 
       Timeline  
Premier Foods PLC 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.
COMBA TELECOM SYST 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COMBA TELECOM SYST has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Premier Foods and COMBA TELECOM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Premier Foods and COMBA TELECOM

The main advantage of trading using opposite Premier Foods and COMBA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, COMBA TELECOM 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 COMBA TELECOM will offset losses from the drop in COMBA TELECOM's long position.
The idea behind Premier Foods PLC and COMBA TELECOM SYST 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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