Correlation Between Elite Education and US Foods

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

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

Diversification Opportunities for Elite Education and US Foods

0.76

Correlation Coefficient

Elite Education  US Foods

Poor diversification

The 3 months correlation between Elite and USFD is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Elite Education Group 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 Elite Education 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 Elite Education Group 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 Elite Education i.e., Elite Education and US Foods go up and down completely randomly.

Pair Corralation between Elite Education and US Foods

Given the investment horizon of 90 days Elite Education Group is expected to generate 5.71 times more return on investment than US Foods. However, Elite Education is 5.71 times more volatile than US Foods Holding. It trades about 0.02 of its potential returns per unit of risk. US Foods Holding is currently generating about 0.1 per unit of risk. If you would invest  183.00  in Elite Education Group on September 2, 2024 and sell it today you would lose (79.00) from holding Elite Education Group or give up 43.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.79%
Values	Daily Returns

Elite Education Group  vs.  US Foods Holding

Elite Education Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elite Education Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward indicators, Elite Education reported solid returns over the last few months and may actually be approaching a breakup point.

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 Elite Education and US Foods

The main advantage of trading using opposite Elite Education and US Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elite Education 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 Elite Education Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.