Correlation Between Premium Brands and Blue Star

Can any of the company-specific risk be diversified away by investing in both Premium Brands and Blue Star 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 Premium Brands and Blue Star into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Premium Brands Holdings and Blue Star Foods, you can compare the effects of market volatilities on Premium Brands and Blue Star 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 Premium Brands with a short position of Blue Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Brands and Blue Star.

Diversification Opportunities for Premium Brands and Blue Star

0.8

Correlation Coefficient

Premium Brands  Blue Star

Very poor diversification

The 3 months correlation between Premium and Blue is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and Blue Star Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Star Foods and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with Blue Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Star Foods has no effect on the direction of Premium Brands i.e., Premium Brands and Blue Star go up and down completely randomly.

Pair Corralation between Premium Brands and Blue Star

Assuming the 90 days horizon Premium Brands Holdings is expected to generate 0.19 times more return on investment than Blue Star. However, Premium Brands Holdings is 5.21 times less risky than Blue Star. It trades about -0.07 of its potential returns per unit of risk. Blue Star Foods is currently generating about -0.13 per unit of risk. If you would invest  6,875  in Premium Brands Holdings on September 28, 2024 and sell it today you would lose (1,341) from holding Premium Brands Holdings or give up 19.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Premium Brands Holdings  vs.  Blue Star Foods

Premium Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Blue Star Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Star Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Premium Brands and Blue Star

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

The idea behind Premium Brands Holdings and Blue Star 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.