Correlation Between US Foods and Andersons

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

Diversification Opportunities for US Foods and Andersons

0.13

Correlation Coefficient

US Foods  Andersons

Average diversification

The 3 months correlation between USFD and Andersons is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and The Andersons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andersons 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 Andersons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andersons has no effect on the direction of US Foods i.e., US Foods and Andersons go up and down completely randomly.

Pair Corralation between US Foods and Andersons

Given the investment horizon of 90 days US Foods Holding is expected to generate 0.38 times more return on investment than Andersons. However, US Foods Holding is 2.66 times less risky than Andersons. It trades about 0.02 of its potential returns per unit of risk. The Andersons is currently generating about -0.05 per unit of risk. If you would invest  6,977  in US Foods Holding on November 29, 2024 and sell it today you would earn a total of  88.00  from holding US Foods Holding or generate 1.26% return on investment over 90 days.

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

US Foods Holding  vs.  The Andersons

US Foods Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, US Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Andersons

Risk-Adjusted Performance

Very Weak

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

Pair Trading with US Foods and Andersons

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

The idea behind US Foods Holding and The Andersons 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.