Correlation Between US Foods and Axfood AB

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

Diversification Opportunities for US Foods and Axfood AB

-0.73

Correlation Coefficient

US Foods  Axfood AB

Pay attention - limited upside

The 3 months correlation between UFH and Axfood is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of US Foods i.e., US Foods and Axfood AB go up and down completely randomly.

Pair Corralation between US Foods and Axfood AB

Assuming the 90 days horizon US Foods Holding is expected to under-perform the Axfood AB. But the stock apears to be less risky and, when comparing its historical volatility, US Foods Holding is 1.07 times less risky than Axfood AB. The stock trades about -0.02 of its potential returns per unit of risk. The Axfood AB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,956  in Axfood AB on September 23, 2024 and sell it today you would earn a total of  87.00  from holding Axfood AB or generate 4.45% return on investment over 90 days.

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

US Foods Holding  vs.  Axfood AB

US Foods Holding

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with US Foods and Axfood AB

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

The idea behind US Foods Holding and Axfood AB 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.