Correlation Between Bridgford Foods and Humatech

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

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

Diversification Opportunities for Bridgford Foods and Humatech

0.61

Correlation Coefficient

Bridgford Foods  Humatech

Poor diversification

The 3 months correlation between Bridgford and Humatech is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and Humatech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humatech and Bridgford 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 Bridgford Foods are associated (or correlated) with Humatech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humatech has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and Humatech go up and down completely randomly.

Pair Corralation between Bridgford Foods and Humatech

Given the investment horizon of 90 days Bridgford Foods is expected to generate 59.5 times less return on investment than Humatech. But when comparing it to its historical volatility, Bridgford Foods is 62.23 times less risky than Humatech. It trades about 0.13 of its potential returns per unit of risk. Humatech is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Humatech on September 12, 2024 and sell it today you would earn a total of  0.17  from holding Humatech or generate 1700.0% return on investment over 90 days.

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

Bridgford Foods  vs.  Humatech

Bridgford Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Humatech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Humatech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Humatech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bridgford Foods and Humatech

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

The idea behind Bridgford Foods and Humatech 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.