Correlation Between Big Rock and US Foods

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

By analyzing existing cross correlation between Big Rock Brewery and US Foods Holding, you can compare the effects of market volatilities on Big Rock 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 Big Rock with a short position of US Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Rock and US Foods.

Diversification Opportunities for Big Rock and US Foods

-0.54

Correlation Coefficient

Big Rock  US Foods

Excellent diversification

The 3 months correlation between Big and USFD is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Big Rock Brewery 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 Big Rock 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 Big Rock Brewery 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 Big Rock i.e., Big Rock and US Foods go up and down completely randomly.

Pair Corralation between Big Rock and US Foods

If you would invest  5,877  in US Foods Holding on August 31, 2024 and sell it today you would earn a total of  1,100  from holding US Foods Holding or generate 18.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Big Rock Brewery  vs.  US Foods Holding

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Big Rock is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

US Foods Holding

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Foods Holding are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, US Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Rock and US Foods

The main advantage of trading using opposite Big Rock and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Rock 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 Big Rock Brewery 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.