Correlation Between US Foods and Organto Foods

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

Diversification Opportunities for US Foods and Organto Foods

-0.16

Correlation Coefficient

US Foods  Organto Foods

Good diversification

The 3 months correlation between USFD and Organto is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding US Foods Holding and Organto Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organto Foods 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 Organto Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organto Foods has no effect on the direction of US Foods i.e., US Foods and Organto Foods go up and down completely randomly.

Pair Corralation between US Foods and Organto Foods

Given the investment horizon of 90 days US Foods Holding is expected to under-perform the Organto Foods. But the stock apears to be less risky and, when comparing its historical volatility, US Foods Holding is 78.93 times less risky than Organto Foods. The stock trades about -0.05 of its potential returns per unit of risk. The Organto Foods is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1.01  in Organto Foods on December 29, 2024 and sell it today you would earn a total of  9.99  from holding Organto Foods or generate 989.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

US Foods Holding  vs.  Organto Foods

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.

Organto Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Organto Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Organto Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Foods and Organto Foods

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

The idea behind US Foods Holding and Organto Foods 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.