Correlation Between Pilgrims Pride and NightFood Holdings

Can any of the company-specific risk be diversified away by investing in both Pilgrims Pride and NightFood Holdings 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 Pilgrims Pride and NightFood Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pilgrims Pride Corp and NightFood Holdings, you can compare the effects of market volatilities on Pilgrims Pride and NightFood Holdings 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 Pilgrims Pride with a short position of NightFood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pilgrims Pride and NightFood Holdings.

Diversification Opportunities for Pilgrims Pride and NightFood Holdings

0.16

Correlation Coefficient

Pilgrims Pride  NightFood Holdings

Average diversification

The 3 months correlation between Pilgrims and NightFood is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Pilgrims Pride Corp and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings and Pilgrims Pride 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 Pilgrims Pride Corp are associated (or correlated) with NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of Pilgrims Pride i.e., Pilgrims Pride and NightFood Holdings go up and down completely randomly.

Pair Corralation between Pilgrims Pride and NightFood Holdings

Considering the 90-day investment horizon Pilgrims Pride is expected to generate 3.94 times less return on investment than NightFood Holdings. But when comparing it to its historical volatility, Pilgrims Pride Corp is 5.5 times less risky than NightFood Holdings. It trades about 0.13 of its potential returns per unit of risk. NightFood Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.65  in NightFood Holdings on December 29, 2024 and sell it today you would earn a total of  0.20  from holding NightFood Holdings or generate 30.77% return on investment over 90 days.

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

Pilgrims Pride Corp  vs.  NightFood Holdings

Pilgrims Pride Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pilgrims Pride exhibited solid returns over the last few months and may actually be approaching a breakup point.

NightFood Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NightFood Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, NightFood Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pilgrims Pride and NightFood Holdings

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

The idea behind Pilgrims Pride Corp and NightFood Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.