Correlation Between Premium Catering and Target Hospitality

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

Diversification Opportunities for Premium Catering and Target Hospitality

-0.56

Correlation Coefficient

Premium Catering  Target Hospitality

Excellent diversification

The 3 months correlation between Premium and Target is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Premium Catering Limited and Target Hospitality Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Hospitality Corp 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 Target Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Hospitality Corp has no effect on the direction of Premium Catering i.e., Premium Catering and Target Hospitality go up and down completely randomly.

Pair Corralation between Premium Catering and Target Hospitality

Allowing for the 90-day total investment horizon Premium Catering Limited is expected to under-perform the Target Hospitality. In addition to that, Premium Catering is 4.53 times more volatile than Target Hospitality Corp. It trades about -0.18 of its total potential returns per unit of risk. Target Hospitality Corp is currently generating about 0.22 per unit of volatility. If you would invest  739.00  in Target Hospitality Corp on September 19, 2024 and sell it today you would earn a total of  223.00  from holding Target Hospitality Corp or generate 30.18% return on investment over 90 days.

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

Premium Catering Limited  vs.  Target Hospitality Corp

Premium Catering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Catering Limited 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 fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Target Hospitality Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Target Hospitality Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Target Hospitality is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Premium Catering and Target Hospitality

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

The idea behind Premium Catering Limited and Target Hospitality 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.

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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.