Correlation Between BBB Foods and 31620MBJ4

Can any of the company-specific risk be diversified away by investing in both BBB Foods and 31620MBJ4 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 31620MBJ4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BBB Foods and US31620MBJ45, you can compare the effects of market volatilities on BBB Foods and 31620MBJ4 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 31620MBJ4. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and 31620MBJ4.

Diversification Opportunities for BBB Foods and 31620MBJ4

0.49

Correlation Coefficient

BBB Foods  31620MBJ4

Very weak diversification

The 3 months correlation between BBB and 31620MBJ4 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and US31620MBJ45 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US31620MBJ45 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 31620MBJ4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US31620MBJ45 has no effect on the direction of BBB Foods i.e., BBB Foods and 31620MBJ4 go up and down completely randomly.

Pair Corralation between BBB Foods and 31620MBJ4

Given the investment horizon of 90 days BBB Foods is expected to generate 1.74 times more return on investment than 31620MBJ4. However, BBB Foods is 1.74 times more volatile than US31620MBJ45. It trades about -0.02 of its potential returns per unit of risk. US31620MBJ45 is currently generating about -0.05 per unit of risk. If you would invest  2,957  in BBB Foods on September 4, 2024 and sell it today you would lose (173.00) from holding BBB Foods or give up 5.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	45.31%
Values	Daily Returns

BBB Foods  vs.  US31620MBJ45

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 latest stock price disturbance, may contribute to short-term losses for the investors.

US31620MBJ45

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US31620MBJ45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 31620MBJ4 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BBB Foods and 31620MBJ4

The main advantage of trading using opposite BBB Foods and 31620MBJ4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, 31620MBJ4 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 31620MBJ4 will offset losses from the drop in 31620MBJ4's long position.

The idea behind BBB Foods and US31620MBJ45 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.