Correlation Between US Foods and Innovative Food

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

Diversification Opportunities for US Foods and Innovative Food

0.39

Correlation Coefficient

US Foods  Innovative Food

Weak diversification

The 3 months correlation between USFD and Innovative is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and Innovative Food Hldg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Food Hldg 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 Innovative Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Food Hldg has no effect on the direction of US Foods i.e., US Foods and Innovative Food go up and down completely randomly.

Pair Corralation between US Foods and Innovative Food

Given the investment horizon of 90 days US Foods Holding is expected to under-perform the Innovative Food. But the stock apears to be less risky and, when comparing its historical volatility, US Foods Holding is 1.95 times less risky than Innovative Food. The stock trades about -0.05 of its potential returns per unit of risk. The Innovative Food Hldg is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  178.00  in Innovative Food Hldg on December 29, 2024 and sell it today you would earn a total of  7.00  from holding Innovative Food Hldg or generate 3.93% return on investment over 90 days.

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

US Foods Holding  vs.  Innovative Food Hldg

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 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.

Innovative Food Hldg

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Food Hldg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Innovative Food is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with US Foods and Innovative Food

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

The idea behind US Foods Holding and Innovative Food Hldg 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..