Correlation Between Flowers Foods and PREMIER FOODS

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

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

Diversification Opportunities for Flowers Foods and PREMIER FOODS

0.42

Correlation Coefficient

Flowers Foods  PREMIER FOODS

Very weak diversification

The 3 months correlation between Flowers and PREMIER is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Flowers Foods and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS and Flowers 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 Flowers Foods are associated (or correlated) with PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of Flowers Foods i.e., Flowers Foods and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Flowers Foods and PREMIER FOODS

Assuming the 90 days horizon Flowers Foods is expected to under-perform the PREMIER FOODS. But the stock apears to be less risky and, when comparing its historical volatility, Flowers Foods is 1.13 times less risky than PREMIER FOODS. The stock trades about -0.41 of its potential returns per unit of risk. The PREMIER FOODS is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  232.00  in PREMIER FOODS on September 29, 2024 and sell it today you would lose (6.00) from holding PREMIER FOODS or give up 2.59% of portfolio value over 90 days.

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

Flowers Foods  vs.  PREMIER FOODS

Flowers Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

PREMIER FOODS

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 2 (%) 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.

Pair Trading with Flowers Foods and PREMIER FOODS

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

The idea behind Flowers Foods and PREMIER FOODS 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.