Correlation Between Life On and US Foods

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

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

Diversification Opportunities for Life On and US Foods

0.0

Correlation Coefficient

Life On  US Foods

Pay attention - limited upside

The 3 months correlation between Life and USFD is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Life On Earth and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding and Life On 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 Life On Earth are associated (or correlated) with US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of Life On i.e., Life On and US Foods go up and down completely randomly.

Pair Corralation between Life On and US Foods

If you would invest  7,075  in US Foods Holding on November 28, 2024 and sell it today you would earn a total of  9.00  from holding US Foods Holding or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Life On Earth  vs.  US Foods Holding

Life On Earth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Life On Earth has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Life On is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

US Foods Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, US Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Life On and US Foods

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

The idea behind Life On Earth and US Foods Holding 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.