Correlation Between S A P and Premium Brands

Can any of the company-specific risk be diversified away by investing in both S A P and Premium Brands 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 S A P and Premium Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saputo Inc and Premium Brands Holdings, you can compare the effects of market volatilities on S A P and Premium Brands 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 S A P with a short position of Premium Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and Premium Brands.

Diversification Opportunities for S A P and Premium Brands

0.64

Correlation Coefficient

S A P  Premium Brands

Poor diversification

The 3 months correlation between SAP and Premium is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings and S A P 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 Saputo Inc are associated (or correlated) with Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of S A P i.e., S A P and Premium Brands go up and down completely randomly.

Pair Corralation between S A P and Premium Brands

Assuming the 90 days trading horizon S A P is expected to generate 2.0 times less return on investment than Premium Brands. But when comparing it to its historical volatility, Saputo Inc is 1.43 times less risky than Premium Brands. It trades about 0.11 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  7,648  in Premium Brands Holdings on April 22, 2025 and sell it today you would earn a total of  1,403  from holding Premium Brands Holdings or generate 18.34% return on investment over 90 days.

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

Saputo Inc  vs.  Premium Brands Holdings

Saputo Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saputo Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Premium Brands Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Premium Brands Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical indicators, Premium Brands displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with S A P and Premium Brands

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

The idea behind Saputo Inc and Premium Brands Holdings 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.