Correlation Between US FOODS and Hexcel
Can any of the company-specific risk be diversified away by investing in both US FOODS and Hexcel 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 Hexcel 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 Hexcel, you can compare the effects of market volatilities on US FOODS and Hexcel 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 Hexcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of US FOODS and Hexcel.
Diversification Opportunities for US FOODS and Hexcel
Very poor diversification
The 3 months correlation between UFH and Hexcel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel 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 Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of US FOODS i.e., US FOODS and Hexcel go up and down completely randomly.
Pair Corralation between US FOODS and Hexcel
Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 0.91 times more return on investment than Hexcel. However, US FOODS HOLDING is 1.1 times less risky than Hexcel. It trades about 0.16 of its potential returns per unit of risk. Hexcel is currently generating about 0.09 per unit of risk. If you would invest 5,550 in US FOODS HOLDING on September 23, 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 Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
US FOODS HOLDING vs. Hexcel
Performance |
Timeline |
US FOODS HOLDING |
Hexcel |
US FOODS and Hexcel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with US FOODS and Hexcel
The main advantage of trading using opposite US FOODS and Hexcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US FOODS position performs unexpectedly, Hexcel 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 Hexcel will offset losses from the drop in Hexcel's long position.The idea behind US FOODS HOLDING and Hexcel 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.Hexcel vs. Raytheon Technologies Corp | Hexcel vs. The Boeing | Hexcel vs. Lockheed Martin | Hexcel vs. The Boeing |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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