Correlation Between Post Holdings and Pilgrims Pride

Can any of the company-specific risk be diversified away by investing in both Post Holdings 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 Post Holdings and Pilgrims Pride into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Post Holdings and Pilgrims Pride Corp, you can compare the effects of market volatilities on Post Holdings 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 Post Holdings with a short position of Pilgrims Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of Post Holdings and Pilgrims Pride.

Diversification Opportunities for Post Holdings and Pilgrims Pride

-0.54

Correlation Coefficient

Post Holdings  Pilgrims Pride

Excellent diversification

The 3 months correlation between Post and Pilgrims is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Post Holdings 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 Post Holdings 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 Post Holdings 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 Post Holdings i.e., Post Holdings and Pilgrims Pride go up and down completely randomly.

Pair Corralation between Post Holdings and Pilgrims Pride

Given the investment horizon of 90 days Post Holdings is expected to generate 3.13 times less return on investment than Pilgrims Pride. But when comparing it to its historical volatility, Post Holdings is 2.13 times less risky than Pilgrims Pride. It trades about 0.07 of its potential returns per unit of risk. Pilgrims Pride Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,605  in Pilgrims Pride Corp on August 31, 2024 and sell it today you would earn a total of  443.00  from holding Pilgrims Pride Corp or generate 9.62% return on investment over 90 days.

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

Post Holdings  vs.  Pilgrims Pride Corp

Post Holdings

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Post Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Post Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pilgrims Pride Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pilgrims Pride may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Post Holdings and Pilgrims Pride

The main advantage of trading using opposite Post Holdings and Pilgrims Pride positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Post Holdings 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 Post Holdings 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.