Correlation Between Premier Foods and Rockfire Resources
Can any of the company-specific risk be diversified away by investing in both Premier Foods and Rockfire Resources 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 Rockfire Resources 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 Rockfire Resources plc, you can compare the effects of market volatilities on Premier Foods and Rockfire Resources 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 Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Rockfire Resources.
Diversification Opportunities for Premier Foods and Rockfire Resources
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Premier and Rockfire is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources plc 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 Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Premier Foods i.e., Premier Foods and Rockfire Resources go up and down completely randomly.
Pair Corralation between Premier Foods and Rockfire Resources
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 0.19 times more return on investment than Rockfire Resources. However, Premier Foods PLC is 5.13 times less risky than Rockfire Resources. It trades about -0.03 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about -0.12 per unit of risk. If you would invest 18,980 in Premier Foods PLC on December 24, 2024 and sell it today you would lose (500.00) from holding Premier Foods PLC or give up 2.63% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Premier Foods PLC vs. Rockfire Resources plc
Performance |
Timeline |
Premier Foods PLC |
Rockfire Resources plc |
Premier Foods and Rockfire Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Premier Foods and Rockfire Resources
The main advantage of trading using opposite Premier Foods and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods position performs unexpectedly, Rockfire Resources 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 Rockfire Resources will offset losses from the drop in Rockfire Resources' long position.Premier Foods vs. CleanTech Lithium plc | Premier Foods vs. Heavitree Brewery | Premier Foods vs. Monster Beverage Corp | Premier Foods vs. Naked Wines plc |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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