Correlation Between Bell Food and Power Metal

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

By analyzing existing cross correlation between Bell Food Group and Power Metal Resources, you can compare the effects of market volatilities on Bell Food and Power Metal 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 Bell Food with a short position of Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bell Food and Power Metal.

Diversification Opportunities for Bell Food and Power Metal

0.31

Correlation Coefficient

Bell Food  Power Metal

Weak diversification

The 3 months correlation between Bell and Power is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bell Food Group and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources and Bell Food 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 Bell Food Group are associated (or correlated) with Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Bell Food i.e., Bell Food and Power Metal go up and down completely randomly.

Pair Corralation between Bell Food and Power Metal

Assuming the 90 days trading horizon Bell Food is expected to generate 4.86 times less return on investment than Power Metal. But when comparing it to its historical volatility, Bell Food Group is 4.08 times less risky than Power Metal. It trades about 0.02 of its potential returns per unit of risk. Power Metal Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,350  in Power Metal Resources on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Power Metal Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Bell Food Group  vs.  Power Metal Resources

Bell Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bell Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bell Food is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Power Metal Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Metal Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bell Food and Power Metal

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

The idea behind Bell Food Group and Power Metal Resources 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.