Correlation Between Premium Brands and George Weston

Can any of the company-specific risk be diversified away by investing in both Premium Brands and George Weston 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 Premium Brands and George Weston into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Premium Brands Holdings and George Weston Limited, you can compare the effects of market volatilities on Premium Brands and George Weston 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 Premium Brands with a short position of George Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Brands and George Weston.

Diversification Opportunities for Premium Brands and George Weston

-0.37

Correlation Coefficient

Premium Brands  George Weston

Very good diversification

The 3 months correlation between Premium and George is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and George Weston Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Weston Limited and Premium Brands 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 Premium Brands Holdings are associated (or correlated) with George Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Weston Limited has no effect on the direction of Premium Brands i.e., Premium Brands and George Weston go up and down completely randomly.

Pair Corralation between Premium Brands and George Weston

Assuming the 90 days trading horizon Premium Brands Holdings is expected to under-perform the George Weston. In addition to that, Premium Brands is 1.5 times more volatile than George Weston Limited. It trades about -0.08 of its total potential returns per unit of risk. George Weston Limited is currently generating about 0.05 per unit of volatility. If you would invest  22,673  in George Weston Limited on September 12, 2024 and sell it today you would earn a total of  732.00  from holding George Weston Limited or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Premium Brands Holdings  vs.  George Weston Limited

Premium Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

George Weston Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Premium Brands and George Weston

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

The idea behind Premium Brands Holdings and George Weston Limited 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.