Correlation Between NI Holdings and BBB Foods

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

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

Diversification Opportunities for NI Holdings and BBB Foods

-0.33

Correlation Coefficient

NI Holdings  BBB Foods

Very good diversification

The 3 months correlation between NODK and BBB is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NI Holdings and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and NI Holdings 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 NI Holdings 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 NI Holdings i.e., NI Holdings and BBB Foods go up and down completely randomly.

Pair Corralation between NI Holdings and BBB Foods

Given the investment horizon of 90 days NI Holdings is expected to generate 0.46 times more return on investment than BBB Foods. However, NI Holdings is 2.16 times less risky than BBB Foods. It trades about -0.12 of its potential returns per unit of risk. BBB Foods is currently generating about -0.16 per unit of risk. If you would invest  1,617  in NI Holdings on September 24, 2024 and sell it today you would lose (76.00) from holding NI Holdings or give up 4.7% of portfolio value over 90 days.

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

NI Holdings  vs.  BBB Foods

NI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NI Holdings and BBB Foods

The main advantage of trading using opposite NI Holdings and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NI Holdings 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 NI Holdings 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.