Correlation Between Premier Foods and Pilgrims Pride

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

Diversification Opportunities for Premier Foods and Pilgrims Pride

0.64

Correlation Coefficient

Premier Foods  Pilgrims Pride

Poor diversification

The 3 months correlation between Premier and Pilgrims is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods Plc and Pilgrims Pride Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilgrims Pride Corp 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 Pilgrims Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilgrims Pride Corp has no effect on the direction of Premier Foods i.e., Premier Foods and Pilgrims Pride go up and down completely randomly.

Pair Corralation between Premier Foods and Pilgrims Pride

If you would invest  4,147  in Pilgrims Pride Corp on September 17, 2024 and sell it today you would earn a total of  1,031  from holding Pilgrims Pride Corp or generate 24.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Premier Foods Plc  vs.  Pilgrims Pride Corp

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.

Pilgrims Pride Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pilgrims Pride exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Foods and Pilgrims Pride

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

The idea behind Premier Foods Plc and Pilgrims Pride Corp 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.

Check out your portfolio center.

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.