Correlation Between US FOODS and NEW MILLENNIUM

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

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

Diversification Opportunities for US FOODS and NEW MILLENNIUM

0.24

Correlation Coefficient

US FOODS  NEW MILLENNIUM

Modest diversification

The 3 months correlation between UFH and NEW is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and NEW MILLENNIUM IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW MILLENNIUM IRON and US 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 US FOODS HOLDING are associated (or correlated) with NEW MILLENNIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW MILLENNIUM IRON has no effect on the direction of US FOODS i.e., US FOODS and NEW MILLENNIUM go up and down completely randomly.

Pair Corralation between US FOODS and NEW MILLENNIUM

Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 0.62 times more return on investment than NEW MILLENNIUM. However, US FOODS HOLDING is 1.6 times less risky than NEW MILLENNIUM. It trades about -0.1 of its potential returns per unit of risk. NEW MILLENNIUM IRON is currently generating about -0.1 per unit of risk. If you would invest  6,500  in US FOODS HOLDING on December 20, 2024 and sell it today you would lose (550.00) from holding US FOODS HOLDING or give up 8.46% of portfolio value over 90 days.

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

US FOODS HOLDING  vs.  NEW MILLENNIUM IRON

US FOODS HOLDING

Risk-Adjusted Performance

Very Weak

Over the last 90 days US FOODS HOLDING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NEW MILLENNIUM IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEW MILLENNIUM IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with US FOODS and NEW MILLENNIUM

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

The idea behind US FOODS HOLDING and NEW MILLENNIUM IRON 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.