Correlation Between Premier Foods and New Residential

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

Diversification Opportunities for Premier Foods and New Residential

0.04

Correlation Coefficient

Premier Foods  New Residential

Significant diversification

The 3 months correlation between Premier and New is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Premier Foods i.e., Premier Foods and New Residential go up and down completely randomly.

Pair Corralation between Premier Foods and New Residential

Assuming the 90 days trading horizon Premier Foods PLC is expected to under-perform the New Residential. But the stock apears to be less risky and, when comparing its historical volatility, Premier Foods PLC is 1.11 times less risky than New Residential. The stock trades about -0.02 of its potential returns per unit of risk. The New Residential Investment is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,058  in New Residential Investment on December 23, 2024 and sell it today you would earn a total of  112.00  from holding New Residential Investment or generate 10.59% return on investment over 90 days.

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

Premier Foods PLC  vs.  New Residential Investment

Premier Foods PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premier Foods PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

New Residential Inve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in New Residential Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, New Residential may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Premier Foods and New Residential

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

The idea behind Premier Foods PLC and New Residential Investment 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.