Correlation Between Premier Foods and Lerøy Seafood

Can any of the company-specific risk be diversified away by investing in both Premier Foods and Lerøy Seafood 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 Lerøy Seafood 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 Lery Seafood Group, you can compare the effects of market volatilities on Premier Foods and Lerøy Seafood 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 Lerøy Seafood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Lerøy Seafood.

Diversification Opportunities for Premier Foods and Lerøy Seafood

0.26

Correlation Coefficient

Premier Foods  Lerøy Seafood

Modest diversification

The 3 months correlation between Premier and Lerøy is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Lery Seafood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lery Seafood Group 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 Lerøy Seafood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lery Seafood Group has no effect on the direction of Premier Foods i.e., Premier Foods and Lerøy Seafood go up and down completely randomly.

Pair Corralation between Premier Foods and Lerøy Seafood

Assuming the 90 days trading horizon Premier Foods PLC is expected to under-perform the Lerøy Seafood. In addition to that, Premier Foods is 1.5 times more volatile than Lery Seafood Group. It trades about -0.01 of its total potential returns per unit of risk. Lery Seafood Group is currently generating about 0.05 per unit of volatility. If you would invest  421.00  in Lery Seafood Group on December 31, 2024 and sell it today you would earn a total of  18.00  from holding Lery Seafood Group or generate 4.28% return on investment over 90 days.

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

Premier Foods PLC  vs.  Lery Seafood Group

Premier Foods PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Foods PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, Premier Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lery Seafood Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lery Seafood Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lerøy Seafood is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Premier Foods and Lerøy Seafood

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

The idea behind Premier Foods PLC and Lery Seafood 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.