Correlation Between Premier Foods and Else Nutrition

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

Diversification Opportunities for Premier Foods and Else Nutrition

0.58

Correlation Coefficient

Premier Foods  Else Nutrition

Very weak diversification

The 3 months correlation between Premier and Else is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods Plc and Else Nutrition Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Else Nutrition Holdings 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 Else Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Else Nutrition Holdings has no effect on the direction of Premier Foods i.e., Premier Foods and Else Nutrition go up and down completely randomly.

Pair Corralation between Premier Foods and Else Nutrition

Assuming the 90 days horizon Premier Foods Plc is expected to generate 0.23 times more return on investment than Else Nutrition. However, Premier Foods Plc is 4.44 times less risky than Else Nutrition. It trades about 0.06 of its potential returns per unit of risk. Else Nutrition Holdings is currently generating about -0.02 per unit of risk. If you would invest  703.00  in Premier Foods Plc on October 25, 2024 and sell it today you would earn a total of  420.00  from holding Premier Foods Plc or generate 59.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	75.1%
Values	Daily Returns

Premier Foods Plc  vs.  Else Nutrition Holdings

Premier Foods Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Foods Plc 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 fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Else Nutrition Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Else Nutrition Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Else Nutrition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Foods and Else Nutrition

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

The idea behind Premier Foods Plc and Else Nutrition 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.