Correlation Between DXP Enterprises and US Foods
Can any of the company-specific risk be diversified away by investing in both DXP Enterprises and US 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 DXP Enterprises and US Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXP Enterprises and US Foods Holding, you can compare the effects of market volatilities on DXP Enterprises and US 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 DXP Enterprises with a short position of US Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and US Foods.
Diversification Opportunities for DXP Enterprises and US Foods
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DXP and USFD is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and US Foods Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Foods Holding and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with US Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Foods Holding has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and US Foods go up and down completely randomly.
Pair Corralation between DXP Enterprises and US Foods
Given the investment horizon of 90 days DXP Enterprises is expected to generate 0.96 times more return on investment than US Foods. However, DXP Enterprises is 1.04 times less risky than US Foods. It trades about 0.02 of its potential returns per unit of risk. US Foods Holding is currently generating about -0.15 per unit of risk. If you would invest 5,173 in DXP Enterprises on January 26, 2024 and sell it today you would earn a total of 18.00 from holding DXP Enterprises or generate 0.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DXP Enterprises vs. US Foods Holding
Performance |
| Timeline |
| DXP Enterprises |
| US Foods Holding |
DXP Enterprises and US Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXP Enterprises and US Foods
The main advantage of trading using opposite DXP Enterprises and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises position performs unexpectedly, US 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 US Foods will offset losses from the drop in US Foods' long position.The idea behind DXP Enterprises and US Foods Holding 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.| US Foods vs. Innovative Food Hldg | US Foods vs. Calavo Growers | US Foods vs. AMCON Distributing | US Foods vs. Mission Produce |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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