Correlation Between Performance Food and PLAYMATES TOYS

Can any of the company-specific risk be diversified away by investing in both Performance Food and PLAYMATES TOYS 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 Performance Food and PLAYMATES TOYS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Performance Food Group and PLAYMATES TOYS, you can compare the effects of market volatilities on Performance Food and PLAYMATES TOYS 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 Performance Food with a short position of PLAYMATES TOYS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and PLAYMATES TOYS.

Diversification Opportunities for Performance Food and PLAYMATES TOYS

-0.7

Correlation Coefficient

Performance Food  PLAYMATES TOYS

Excellent diversification

The 3 months correlation between Performance and PLAYMATES is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and PLAYMATES TOYS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYMATES TOYS and Performance Food 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 Performance Food Group are associated (or correlated) with PLAYMATES TOYS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYMATES TOYS has no effect on the direction of Performance Food i.e., Performance Food and PLAYMATES TOYS go up and down completely randomly.

Pair Corralation between Performance Food and PLAYMATES TOYS

Assuming the 90 days trading horizon Performance Food Group is expected to generate 0.27 times more return on investment than PLAYMATES TOYS. However, Performance Food Group is 3.64 times less risky than PLAYMATES TOYS. It trades about 0.15 of its potential returns per unit of risk. PLAYMATES TOYS is currently generating about -0.02 per unit of risk. If you would invest  7,600  in Performance Food Group on October 25, 2024 and sell it today you would earn a total of  850.00  from holding Performance Food Group or generate 11.18% return on investment over 90 days.

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

Performance Food Group  vs.  PLAYMATES TOYS

Performance Food

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Performance Food may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PLAYMATES TOYS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Performance Food and PLAYMATES TOYS

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

The idea behind Performance Food Group and PLAYMATES TOYS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.