Correlation Between Premium Catering and AZZ Incorporated

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

By analyzing existing cross correlation between Premium Catering Limited and AZZ Incorporated, you can compare the effects of market volatilities on Premium Catering and AZZ Incorporated 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 Catering with a short position of AZZ Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Catering and AZZ Incorporated.

Diversification Opportunities for Premium Catering and AZZ Incorporated

-0.3

Correlation Coefficient

Premium Catering  AZZ Incorporated

Very good diversification

The 3 months correlation between Premium and AZZ is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Premium Catering Limited and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated and Premium Catering 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 Catering Limited are associated (or correlated) with AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Premium Catering i.e., Premium Catering and AZZ Incorporated go up and down completely randomly.

Pair Corralation between Premium Catering and AZZ Incorporated

Allowing for the 90-day total investment horizon Premium Catering Limited is expected to generate 2.98 times more return on investment than AZZ Incorporated. However, Premium Catering is 2.98 times more volatile than AZZ Incorporated. It trades about 0.09 of its potential returns per unit of risk. AZZ Incorporated is currently generating about 0.11 per unit of risk. If you would invest  68.00  in Premium Catering Limited on October 25, 2024 and sell it today you would earn a total of  16.80  from holding Premium Catering Limited or generate 24.71% return on investment over 90 days.

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

Premium Catering Limited  vs.  AZZ Incorporated

Premium Catering

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Catering Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Premium Catering exhibited solid returns over the last few months and may actually be approaching a breakup point.

AZZ Incorporated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premium Catering and AZZ Incorporated

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

The idea behind Premium Catering Limited and AZZ Incorporated 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.