Correlation Between Performance Food and UMWELTBANK

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

Diversification Opportunities for Performance Food and UMWELTBANK

0.89

Correlation Coefficient

Performance Food  UMWELTBANK

Very poor diversification

The 3 months correlation between Performance and UMWELTBANK is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of Performance Food i.e., Performance Food and UMWELTBANK go up and down completely randomly.

Pair Corralation between Performance Food and UMWELTBANK

Assuming the 90 days trading horizon Performance Food Group is expected to generate 1.16 times more return on investment than UMWELTBANK. However, Performance Food is 1.16 times more volatile than UMWELTBANK. It trades about 0.15 of its potential returns per unit of risk. UMWELTBANK is currently generating about -0.03 per unit of risk. If you would invest  6,050  in Performance Food Group on September 29, 2024 and sell it today you would earn a total of  2,100  from holding Performance Food Group or generate 34.71% return on investment over 90 days.

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

Performance Food Group  vs.  UMWELTBANK

Performance Food

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. 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.

UMWELTBANK

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, UMWELTBANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Performance Food and UMWELTBANK

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

The idea behind Performance Food Group and UMWELTBANK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.