Correlation Between US FOODS and Information Services

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

Diversification Opportunities for US FOODS and Information Services

0.52

Correlation Coefficient

US FOODS  Information Services

Very weak diversification

The 3 months correlation between UFH and Information is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and Information Services Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Services 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 Information Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Services has no effect on the direction of US FOODS i.e., US FOODS and Information Services go up and down completely randomly.

Pair Corralation between US FOODS and Information Services

Assuming the 90 days trading horizon US FOODS HOLDING is expected to under-perform the Information Services. But the stock apears to be less risky and, when comparing its historical volatility, US FOODS HOLDING is 1.86 times less risky than Information Services. The stock trades about -0.18 of its potential returns per unit of risk. The Information Services International Dentsu is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,640  in Information Services International Dentsu on October 8, 2024 and sell it today you would lose (40.00) from holding Information Services International Dentsu or give up 1.1% of portfolio value over 90 days.

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

US FOODS HOLDING  vs.  Information Services Internati

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 uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Information Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Information Services International Dentsu are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Information Services may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with US FOODS and Information Services

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

The idea behind US FOODS HOLDING and Information Services International Dentsu 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.