Correlation Between Premier Foods and Artisan Consumer

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

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

Diversification Opportunities for Premier Foods and Artisan Consumer

0.92

Correlation Coefficient

Premier Foods  Artisan Consumer

Almost no diversification

The 3 months correlation between Premier and Artisan is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods plc and Artisan Consumer Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Consumer Goods and Premier 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 Premier Foods plc are associated (or correlated) with Artisan Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Consumer Goods has no effect on the direction of Premier Foods i.e., Premier Foods and Artisan Consumer go up and down completely randomly.

Pair Corralation between Premier Foods and Artisan Consumer

Assuming the 90 days horizon Premier Foods is expected to generate 1.0 times less return on investment than Artisan Consumer. In addition to that, Premier Foods is 1.1 times more volatile than Artisan Consumer Goods. It trades about 0.07 of its total potential returns per unit of risk. Artisan Consumer Goods is currently generating about 0.08 per unit of volatility. If you would invest  12.00  in Artisan Consumer Goods on January 30, 2024 and sell it today you would earn a total of  2.00  from holding Artisan Consumer Goods or generate 16.67% return on investment over 90 days.

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

Premier Foods plc  vs.  Artisan Consumer Goods

Premier Foods plc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Artisan Consumer Goods

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Consumer Goods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Artisan Consumer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Foods and Artisan Consumer

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

The idea behind Premier Foods plc and Artisan Consumer Goods 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.