Correlation Between Smurfit Kappa and US FOODS

Can any of the company-specific risk be diversified away by investing in both Smurfit Kappa and US FOODS 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 Smurfit Kappa and US FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smurfit Kappa Group and US FOODS HOLDING, you can compare the effects of market volatilities on Smurfit Kappa and US FOODS 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 Smurfit Kappa with a short position of US FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smurfit Kappa and US FOODS.

Diversification Opportunities for Smurfit Kappa and US FOODS

0.9

Correlation Coefficient

Smurfit Kappa  US FOODS

Almost no diversification

The 3 months correlation between Smurfit and UFH is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Smurfit Kappa Group and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING and Smurfit Kappa 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 Smurfit Kappa Group are associated (or correlated) with US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Smurfit Kappa i.e., Smurfit Kappa and US FOODS go up and down completely randomly.

Pair Corralation between Smurfit Kappa and US FOODS

Assuming the 90 days horizon Smurfit Kappa is expected to generate 1.45 times less return on investment than US FOODS. In addition to that, Smurfit Kappa is 1.47 times more volatile than US FOODS HOLDING. It trades about 0.05 of its total potential returns per unit of risk. US FOODS HOLDING is currently generating about 0.11 per unit of volatility. If you would invest  2,940  in US FOODS HOLDING on September 22, 2024 and sell it today you would earn a total of  3,510  from holding US FOODS HOLDING or generate 119.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Smurfit Kappa Group  vs.  US FOODS HOLDING

Smurfit Kappa Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smurfit Kappa Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Smurfit Kappa reported solid returns over the last few months and may actually be approaching a breakup point.

US FOODS HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smurfit Kappa and US FOODS

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

The idea behind Smurfit Kappa Group and US FOODS HOLDING 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.