Correlation Between Premier Foods and Edita Food

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

Diversification Opportunities for Premier Foods and Edita Food

-0.21

Correlation Coefficient

Premier Foods  Edita Food

Very good diversification

The 3 months correlation between Premier and Edita is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Edita Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edita Food Industries 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 Edita Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edita Food Industries has no effect on the direction of Premier Foods i.e., Premier Foods and Edita Food go up and down completely randomly.

Pair Corralation between Premier Foods and Edita Food

Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.33 times more return on investment than Edita Food. However, Premier Foods PLC is 3.05 times less risky than Edita Food. It trades about 0.05 of its potential returns per unit of risk. Edita Food Industries is currently generating about -0.07 per unit of risk. If you would invest  18,440  in Premier Foods PLC on September 26, 2024 and sell it today you would earn a total of  540.00  from holding Premier Foods PLC or generate 2.93% return on investment over 90 days.

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

Premier Foods PLC  vs.  Edita Food Industries

Premier Foods PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Edita Food Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edita Food Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Premier Foods and Edita Food

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

The idea behind Premier Foods PLC and Edita Food Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.