Correlation Between Avient Corp and BBB Foods

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

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

Diversification Opportunities for Avient Corp and BBB Foods

0.35

Correlation Coefficient

Avient Corp  BBB Foods

Weak diversification

The 3 months correlation between Avient and BBB is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Avient Corp and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Avient Corp 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 Avient Corp are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Avient Corp i.e., Avient Corp and BBB Foods go up and down completely randomly.

Pair Corralation between Avient Corp and BBB Foods

Given the investment horizon of 90 days Avient Corp is expected to under-perform the BBB Foods. But the stock apears to be less risky and, when comparing its historical volatility, Avient Corp is 1.44 times less risky than BBB Foods. The stock trades about -0.17 of its potential returns per unit of risk. The BBB Foods is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,990  in BBB Foods on September 26, 2024 and sell it today you would lose (20.00) from holding BBB Foods or give up 0.67% of portfolio value over 90 days.

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

Avient Corp  vs.  BBB Foods

Avient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avient Corp and BBB Foods

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

The idea behind Avient Corp and BBB 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.