Correlation Between Performance Food and PREMIER FOODS

Can any of the company-specific risk be diversified away by investing in both Performance Food 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 Performance Food and PREMIER FOODS 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 PREMIER FOODS, you can compare the effects of market volatilities on Performance Food 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 Performance Food with a short position of PREMIER FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and PREMIER FOODS.

Diversification Opportunities for Performance Food and PREMIER FOODS

0.6

Correlation Coefficient

Performance Food  PREMIER FOODS

Poor diversification

The 3 months correlation between Performance and PREMIER is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS 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 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 Performance Food i.e., Performance Food and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Performance Food and PREMIER FOODS

Assuming the 90 days trading horizon Performance Food is expected to generate 1.36 times less return on investment than PREMIER FOODS. In addition to that, Performance Food is 1.09 times more volatile than PREMIER FOODS. It trades about 0.08 of its total potential returns per unit of risk. PREMIER FOODS is currently generating about 0.11 per unit of volatility. If you would invest  153.00  in PREMIER FOODS on October 5, 2024 and sell it today you would earn a total of  73.00  from holding PREMIER FOODS or generate 47.71% return on investment over 90 days.

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

Performance Food Group  vs.  PREMIER FOODS

Performance Food

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Performance Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Performance Food unveiled solid returns over the last few months and may actually be approaching a breakup point.

PREMIER FOODS

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days PREMIER FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain technical and fundamental indicators, PREMIER FOODS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Performance Food and PREMIER FOODS

The main advantage of trading using opposite Performance Food and PREMIER FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food 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 Performance Food Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.