Correlation Between BBB Foods and NI Holdings

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

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

Diversification Opportunities for BBB Foods and NI Holdings

-0.33

Correlation Coefficient

BBB Foods  NI Holdings

Very good diversification

The 3 months correlation between BBB and NODK is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and BBB 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 BBB Foods are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of BBB Foods i.e., BBB Foods and NI Holdings go up and down completely randomly.

Pair Corralation between BBB Foods and NI Holdings

Given the investment horizon of 90 days BBB Foods is expected to under-perform the NI Holdings. In addition to that, BBB Foods is 1.91 times more volatile than NI Holdings. It trades about -0.03 of its total potential returns per unit of risk. NI Holdings is currently generating about 0.02 per unit of volatility. If you would invest  1,523  in NI Holdings on September 24, 2024 and sell it today you would earn a total of  25.50  from holding NI Holdings or generate 1.67% return on investment over 90 days.

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

BBB Foods  vs.  NI Holdings

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.

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.

Pair Trading with BBB Foods and NI Holdings

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

The idea behind BBB Foods and NI 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.