Correlation Between Premium Brands and Better Choice

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

Diversification Opportunities for Premium Brands and Better Choice

0.02

Correlation Coefficient

Premium Brands  Better Choice

Significant diversification

The 3 months correlation between Premium and Better is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice 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 Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Premium Brands i.e., Premium Brands and Better Choice go up and down completely randomly.

Pair Corralation between Premium Brands and Better Choice

Assuming the 90 days horizon Premium Brands Holdings is expected to under-perform the Better Choice. But the pink sheet apears to be less risky and, when comparing its historical volatility, Premium Brands Holdings is 2.51 times less risky than Better Choice. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Better Choice is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  210.00  in Better Choice on September 4, 2024 and sell it today you would lose (10.00) from holding Better Choice or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Premium Brands Holdings  vs.  Better Choice

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. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Better Choice

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Better Choice are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Better Choice may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Premium Brands and Better Choice

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

The idea behind Premium Brands Holdings and Better Choice 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.