Correlation Between North West and Premium Brands

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

By analyzing existing cross correlation between The North West and Premium Brands Holdings, you can compare the effects of market volatilities on North West and Premium Brands 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 North West with a short position of Premium Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of North West and Premium Brands.

Diversification Opportunities for North West and Premium Brands

0.54

Correlation Coefficient

North West  Premium Brands

Very weak diversification

The 3 months correlation between North and Premium is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The North West and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings and North West 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 The North West are associated (or correlated) with Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of North West i.e., North West and Premium Brands go up and down completely randomly.

Pair Corralation between North West and Premium Brands

Assuming the 90 days horizon The North West is expected to generate 4.53 times more return on investment than Premium Brands. However, North West is 4.53 times more volatile than Premium Brands Holdings. It trades about 0.06 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about -0.09 per unit of risk. If you would invest  3,351  in The North West on October 21, 2024 and sell it today you would earn a total of  91.00  from holding The North West or generate 2.72% return on investment over 90 days.

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

The North West  vs.  Premium Brands Holdings

North West

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The North West has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Premium Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with North West and Premium Brands

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

The idea behind The North West and Premium Brands Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.