Correlation Between US FOODS and China Water

Can any of the company-specific risk be diversified away by investing in both US FOODS and China Water 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 US FOODS and China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US FOODS HOLDING and China Water Industry, you can compare the effects of market volatilities on US FOODS and China Water 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 US FOODS with a short position of China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of US FOODS and China Water.

Diversification Opportunities for US FOODS and China Water

-0.88

Correlation Coefficient

US FOODS  China Water

Pay attention - limited upside

The 3 months correlation between UFH and China is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and China Water Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Industry and US 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 US FOODS HOLDING are associated (or correlated) with China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Industry has no effect on the direction of US FOODS i.e., US FOODS and China Water go up and down completely randomly.

Pair Corralation between US FOODS and China Water

Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 0.23 times more return on investment than China Water. However, US FOODS HOLDING is 4.35 times less risky than China Water. It trades about 0.16 of its potential returns per unit of risk. China Water Industry is currently generating about -0.14 per unit of risk. If you would invest  5,550  in US FOODS HOLDING on September 24, 2024 and sell it today you would earn a total of  950.00  from holding US FOODS HOLDING or generate 17.12% return on investment over 90 days.

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

US FOODS HOLDING  vs.  China Water Industry

US FOODS HOLDING

Risk-Adjusted Performance

12 of 100

Good

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

China Water Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Water Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with US FOODS and China Water

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

The idea behind US FOODS HOLDING and China Water Industry 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.