Correlation Between Premier Foods and Natural Alternatives

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

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

Diversification Opportunities for Premier Foods and Natural Alternatives

0.67

Correlation Coefficient

Premier Foods  Natural Alternatives

Poor diversification

The 3 months correlation between Premier and Natural is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods plc and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives and Premier 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 Premier Foods plc are associated (or correlated) with Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of Premier Foods i.e., Premier Foods and Natural Alternatives go up and down completely randomly.

Pair Corralation between Premier Foods and Natural Alternatives

Assuming the 90 days horizon Premier Foods is expected to generate 2.24 times less return on investment than Natural Alternatives. But when comparing it to its historical volatility, Premier Foods plc is 1.81 times less risky than Natural Alternatives. It trades about 0.13 of its potential returns per unit of risk. Natural Alternatives International is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  281.00  in Natural Alternatives International on May 5, 2025 and sell it today you would earn a total of  80.00  from holding Natural Alternatives International or generate 28.47% return on investment over 90 days.

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

Premier Foods plc  vs.  Natural Alternatives Internati

Premier Foods plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Premier Foods may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Natural Alternatives

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Alternatives International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Natural Alternatives demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Premier Foods and Natural Alternatives

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

The idea behind Premier Foods plc and Natural Alternatives International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.