Correlation Between Federal Signal and Dr Foods

Can any of the company-specific risk be diversified away by investing in both Federal Signal and Dr Foods 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 Federal Signal and Dr Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federal Signal and Dr Foods, you can compare the effects of market volatilities on Federal Signal and Dr Foods 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 Federal Signal with a short position of Dr Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Signal and Dr Foods.

Diversification Opportunities for Federal Signal and Dr Foods

-0.68

Correlation Coefficient

Federal Signal  Dr Foods

Excellent diversification

The 3 months correlation between Federal and DRFS is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Federal Signal and Dr Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Foods and Federal Signal 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 Federal Signal are associated (or correlated) with Dr Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Foods has no effect on the direction of Federal Signal i.e., Federal Signal and Dr Foods go up and down completely randomly.

Pair Corralation between Federal Signal and Dr Foods

If you would invest  7,661  in Federal Signal on April 24, 2025 and sell it today you would earn a total of  3,239  from holding Federal Signal or generate 42.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.64%
Values	Daily Returns

Federal Signal  vs.  Dr Foods

Federal Signal

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Signal are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Federal Signal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dr Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dr Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Dr Foods is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Federal Signal and Dr Foods

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

The idea behind Federal Signal and Dr Foods 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.