Correlation Between Premier Foods and Calbee

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

Diversification Opportunities for Premier Foods and Calbee

0.13

Correlation Coefficient

Premier Foods  Calbee

Average diversification

The 3 months correlation between Premier and Calbee is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods Plc and Calbee Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calbee Inc 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 Calbee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calbee Inc has no effect on the direction of Premier Foods i.e., Premier Foods and Calbee go up and down completely randomly.

Pair Corralation between Premier Foods and Calbee

Assuming the 90 days horizon Premier Foods Plc is expected to generate 0.72 times more return on investment than Calbee. However, Premier Foods Plc is 1.38 times less risky than Calbee. It trades about 0.09 of its potential returns per unit of risk. Calbee Inc is currently generating about -0.01 per unit of risk. If you would invest  1,139  in Premier Foods Plc on December 29, 2024 and sell it today you would earn a total of  111.00  from holding Premier Foods Plc or generate 9.75% return on investment over 90 days.

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

Premier Foods Plc  vs.  Calbee Inc

Premier Foods Plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods Plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Calbee Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calbee Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Calbee is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Premier Foods and Calbee

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

The idea behind Premier Foods Plc and Calbee Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.