Correlation Between Powerof Canada and Premium Brands

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

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

Diversification Opportunities for Powerof Canada and Premium Brands

-0.32

Correlation Coefficient

Powerof Canada  Premium Brands

Very good diversification

The 3 months correlation between Powerof and Premium is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Power of and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings and Powerof Canada 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 Power of are associated (or correlated) with Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of Powerof Canada i.e., Powerof Canada and Premium Brands go up and down completely randomly.

Pair Corralation between Powerof Canada and Premium Brands

Assuming the 90 days horizon Power of is expected to generate 0.55 times more return on investment than Premium Brands. However, Power of is 1.81 times less risky than Premium Brands. It trades about 0.06 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about -0.03 per unit of risk. If you would invest  2,451  in Power of on October 5, 2024 and sell it today you would earn a total of  588.00  from holding Power of or generate 23.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.06%
Values	Daily Returns

Power of  vs.  Premium Brands Holdings

Powerof Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Powerof Canada is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Powerof Canada and Premium Brands

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

The idea behind Power of and Premium Brands 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.