Correlation Between Premier Foods and Jacquet Metal

Can any of the company-specific risk be diversified away by investing in both Premier Foods and Jacquet Metal 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 Premier Foods and Jacquet Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Premier Foods PLC and Jacquet Metal Service, you can compare the effects of market volatilities on Premier Foods and Jacquet Metal 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 Premier Foods with a short position of Jacquet Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Jacquet Metal.

Diversification Opportunities for Premier Foods and Jacquet Metal

0.6

Correlation Coefficient

Premier Foods  Jacquet Metal

Poor diversification

The 3 months correlation between Premier and Jacquet is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Jacquet Metal Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacquet Metal Service and Premier Foods 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 Premier Foods PLC are associated (or correlated) with Jacquet Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacquet Metal Service has no effect on the direction of Premier Foods i.e., Premier Foods and Jacquet Metal go up and down completely randomly.

Pair Corralation between Premier Foods and Jacquet Metal

Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.92 times more return on investment than Jacquet Metal. However, Premier Foods PLC is 1.09 times less risky than Jacquet Metal. It trades about 0.13 of its potential returns per unit of risk. Jacquet Metal Service is currently generating about -0.02 per unit of risk. If you would invest  18,880  in Premier Foods PLC on September 3, 2024 and sell it today you would earn a total of  680.00  from holding Premier Foods PLC or generate 3.6% return on investment over 90 days.

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

Premier Foods PLC  vs.  Jacquet Metal Service

Premier Foods PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Jacquet Metal Service

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jacquet Metal Service are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Jacquet Metal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Premier Foods and Jacquet Metal

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

The idea behind Premier Foods PLC and Jacquet Metal Service 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.