Correlation Between Performance Food and Organto Foods

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

By analyzing existing cross correlation between Performance Food Group and Organto Foods, you can compare the effects of market volatilities on Performance Food and Organto Foods 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 Performance Food with a short position of Organto Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Organto Foods.

Diversification Opportunities for Performance Food and Organto Foods

-0.02

Correlation Coefficient

Performance Food  Organto Foods

Good diversification

The 3 months correlation between Performance and Organto is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Organto Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organto Foods and Performance Food 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 Performance Food Group are associated (or correlated) with Organto Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organto Foods has no effect on the direction of Performance Food i.e., Performance Food and Organto Foods go up and down completely randomly.

Pair Corralation between Performance Food and Organto Foods

Given the investment horizon of 90 days Performance Food Group is expected to generate 0.49 times more return on investment than Organto Foods. However, Performance Food Group is 2.04 times less risky than Organto Foods. It trades about 0.21 of its potential returns per unit of risk. Organto Foods is currently generating about -0.1 per unit of risk. If you would invest  7,349  in Performance Food Group on August 31, 2024 and sell it today you would earn a total of  1,442  from holding Performance Food Group or generate 19.62% return on investment over 90 days.

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

Performance Food Group  vs.  Organto Foods

Performance Food

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Performance Food exhibited solid returns over the last few months and may actually be approaching a breakup point.

Organto Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organto Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Performance Food and Organto Foods

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

The idea behind Performance Food Group and Organto Foods 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.