Correlation Between US FOODS and Fresnillo Plc

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

Diversification Opportunities for US FOODS and Fresnillo Plc

-0.25

Correlation Coefficient

US FOODS  Fresnillo Plc

Very good diversification

The 3 months correlation between UFH and Fresnillo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and Fresnillo plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresnillo plc 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 Fresnillo Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresnillo plc has no effect on the direction of US FOODS i.e., US FOODS and Fresnillo Plc go up and down completely randomly.

Pair Corralation between US FOODS and Fresnillo Plc

Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 0.55 times more return on investment than Fresnillo Plc. However, US FOODS HOLDING is 1.82 times less risky than Fresnillo Plc. It trades about 0.1 of its potential returns per unit of risk. Fresnillo plc is currently generating about -0.01 per unit of risk. If you would invest  3,440  in US FOODS HOLDING on October 8, 2024 and sell it today you would earn a total of  3,160  from holding US FOODS HOLDING or generate 91.86% return on investment over 90 days.

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

US FOODS HOLDING  vs.  Fresnillo plc

US FOODS HOLDING

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fresnillo plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fresnillo plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Fresnillo Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with US FOODS and Fresnillo Plc

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

The idea behind US FOODS HOLDING and Fresnillo plc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.