Correlation Between Lancaster Colony and Premier Foods

Can any of the company-specific risk be diversified away by investing in both Lancaster Colony and Premier 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 Lancaster Colony and Premier Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lancaster Colony and Premier Foods plc, you can compare the effects of market volatilities on Lancaster Colony and Premier 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 Lancaster Colony with a short position of Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Premier Foods.

Diversification Opportunities for Lancaster Colony and Premier Foods

0.0

Correlation Coefficient

Lancaster Colony  Premier Foods

Pay attention - limited upside

The 3 months correlation between Lancaster and Premier is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Premier Foods plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods plc and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods plc has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Premier Foods go up and down completely randomly.

Pair Corralation between Lancaster Colony and Premier Foods

If you would invest  180.00  in Premier Foods plc on February 15, 2024 and sell it today you would earn a total of  0.00  from holding Premier Foods plc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Lancaster Colony  vs.  Premier Foods plc

Lancaster Colony

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Premier Foods plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Premier Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lancaster Colony and Premier Foods

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

The idea behind Lancaster Colony and Premier Foods plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.