Correlation Between Premier Foods and JBS SA

Can any of the company-specific risk be diversified away by investing in both Premier Foods and JBS SA 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 JBS SA 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 JBS SA, you can compare the effects of market volatilities on Premier Foods and JBS SA 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 JBS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and JBS SA.

Diversification Opportunities for Premier Foods and JBS SA

0.47

Correlation Coefficient

Premier Foods  JBS SA

Very weak diversification

The 3 months correlation between Premier and JBS is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods Plc and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA 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 JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of Premier Foods i.e., Premier Foods and JBS SA go up and down completely randomly.

Pair Corralation between Premier Foods and JBS SA

If you would invest  1,191  in JBS SA on September 18, 2024 and sell it today you would earn a total of  71.00  from holding JBS SA or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Premier Foods Plc  vs.  JBS SA

Premier Foods Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Foods Plc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

JBS SA

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, JBS SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Premier Foods and JBS SA

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

The idea behind Premier Foods Plc and JBS SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.