Correlation Between Premier Foods and Power Metal

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

Diversification Opportunities for Premier Foods and Power Metal

-0.31

Correlation Coefficient

Premier Foods  Power Metal

Very good diversification

The 3 months correlation between Premier and Power is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Premier Foods i.e., Premier Foods and Power Metal go up and down completely randomly.

Pair Corralation between Premier Foods and Power Metal

Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.49 times more return on investment than Power Metal. However, Premier Foods PLC is 2.06 times less risky than Power Metal. It trades about 0.0 of its potential returns per unit of risk. Power Metal Resources is currently generating about -0.17 per unit of risk. If you would invest  18,780  in Premier Foods PLC on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Premier Foods PLC or generate 0.0% 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.  Power Metal Resources

Premier Foods PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 4 (%) 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.

Power Metal Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Metal Resources 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Premier Foods and Power Metal

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

The idea behind Premier Foods PLC and Power Metal Resources 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.