Correlation Between Associated British and Bridgford Foods

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

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

Diversification Opportunities for Associated British and Bridgford Foods

0.29

Correlation Coefficient

Associated British  Bridgford Foods

Modest diversification

The 3 months correlation between Associated and Bridgford is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods and Associated British 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 Associated British Foods are associated (or correlated) with Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of Associated British i.e., Associated British and Bridgford Foods go up and down completely randomly.

Pair Corralation between Associated British and Bridgford Foods

Assuming the 90 days horizon Associated British Foods is expected to generate 0.29 times more return on investment than Bridgford Foods. However, Associated British Foods is 3.46 times less risky than Bridgford Foods. It trades about -0.17 of its potential returns per unit of risk. Bridgford Foods is currently generating about -0.14 per unit of risk. If you would invest  3,155  in Associated British Foods on September 2, 2024 and sell it today you would lose (320.00) from holding Associated British Foods or give up 10.14% of portfolio value over 90 days.

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

Associated British Foods  vs.  Bridgford Foods

Associated British Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Associated British Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Bridgford Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Associated British and Bridgford Foods

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

The idea behind Associated British Foods and Bridgford 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.