Correlation Between Tri Pointe and Performance Food

Can any of the company-specific risk be diversified away by investing in both Tri Pointe and Performance Food 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 Tri Pointe and Performance Food into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tri Pointe Homes and Performance Food Group, you can compare the effects of market volatilities on Tri Pointe and Performance Food 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 Tri Pointe with a short position of Performance Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tri Pointe and Performance Food.

Diversification Opportunities for Tri Pointe and Performance Food

-0.11

Correlation Coefficient

Tri Pointe  Performance Food

Good diversification

The 3 months correlation between Tri and Performance is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and Performance Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performance Food and Tri Pointe 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 Tri Pointe Homes are associated (or correlated) with Performance Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performance Food has no effect on the direction of Tri Pointe i.e., Tri Pointe and Performance Food go up and down completely randomly.

Pair Corralation between Tri Pointe and Performance Food

Assuming the 90 days horizon Tri Pointe Homes is expected to under-perform the Performance Food. In addition to that, Tri Pointe is 1.35 times more volatile than Performance Food Group. It trades about -0.11 of its total potential returns per unit of risk. Performance Food Group is currently generating about 0.17 per unit of volatility. If you would invest  7,100  in Performance Food Group on October 8, 2024 and sell it today you would earn a total of  1,050  from holding Performance Food Group or generate 14.79% return on investment over 90 days.

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

Tri Pointe Homes  vs.  Performance Food Group

Tri Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Performance Food

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Performance Food Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Performance Food unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tri Pointe and Performance Food

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

The idea behind Tri Pointe Homes and Performance Food Group 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 Commodity Directory module to find actively traded commodities issued by global exchanges.