Correlation Between Premium Brands and Spin Master

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

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

Diversification Opportunities for Premium Brands and Spin Master

-0.25

Correlation Coefficient

Premium Brands  Spin Master

Very good diversification

The 3 months correlation between Premium and Spin is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and Spin Master Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spin Master Corp and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with Spin Master. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spin Master Corp has no effect on the direction of Premium Brands i.e., Premium Brands and Spin Master go up and down completely randomly.

Pair Corralation between Premium Brands and Spin Master

Assuming the 90 days trading horizon Premium Brands Holdings is expected to under-perform the Spin Master. But the stock apears to be less risky and, when comparing its historical volatility, Premium Brands Holdings is 1.19 times less risky than Spin Master. The stock trades about -0.16 of its potential returns per unit of risk. The Spin Master Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,202  in Spin Master Corp on October 12, 2024 and sell it today you would earn a total of  20.00  from holding Spin Master Corp or generate 0.62% return on investment over 90 days.

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

Premium Brands Holdings  vs.  Spin Master Corp

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. In spite of uncertain performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Spin Master Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spin Master Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Spin Master is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Premium Brands and Spin Master

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

The idea behind Premium Brands Holdings and Spin Master Corp 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.