Correlation Between Performance Food and Alarm Holdings
Can any of the company-specific risk be diversified away by investing in both Performance Food and Alarm Holdings 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 Performance Food and Alarm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Alarm Holdings, you can compare the effects of market volatilities on Performance Food and Alarm Holdings 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 Performance Food with a short position of Alarm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Alarm Holdings.
Diversification Opportunities for Performance Food and Alarm Holdings
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Performance and Alarm is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Alarm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarm Holdings and Performance Food 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 Performance Food Group are associated (or correlated) with Alarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarm Holdings has no effect on the direction of Performance Food i.e., Performance Food and Alarm Holdings go up and down completely randomly.
Pair Corralation between Performance Food and Alarm Holdings
Given the investment horizon of 90 days Performance Food Group is expected to generate 0.88 times more return on investment than Alarm Holdings. However, Performance Food Group is 1.14 times less risky than Alarm Holdings. It trades about 0.24 of its potential returns per unit of risk. Alarm Holdings is currently generating about 0.07 per unit of risk. If you would invest 7,631 in Performance Food Group on April 14, 2025 and sell it today you would earn a total of 1,850 from holding Performance Food Group or generate 24.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Performance Food Group vs. Alarm Holdings
Performance |
| Timeline |
| Performance Food |
| Alarm Holdings |
Performance Food and Alarm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Alarm Holdings
The main advantage of trading using opposite Performance Food and Alarm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food position performs unexpectedly, Alarm Holdings 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 Alarm Holdings will offset losses from the drop in Alarm Holdings' long position.| Performance Food vs. Sysco | Performance Food vs. The Chefs Warehouse | Performance Food vs. United Natural Foods | Performance Food vs. Calavo Growers |
| Alarm Holdings vs. Alkami Technology | Alarm Holdings vs. ADEIA P | Alarm Holdings vs. Cerence | Alarm Holdings vs. Appfolio |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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