Correlation Between PLANT VEDA and BG Foods

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

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

Diversification Opportunities for PLANT VEDA and BG Foods

0.0

Correlation Coefficient

PLANT VEDA  BG Foods

Pay attention - limited upside

The 3 months correlation between PLANT and DHR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PLANT VEDA FOODS and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and PLANT VEDA 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 PLANT VEDA FOODS are associated (or correlated) with BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of PLANT VEDA i.e., PLANT VEDA and BG Foods go up and down completely randomly.

Pair Corralation between PLANT VEDA and BG Foods

Assuming the 90 days horizon PLANT VEDA FOODS is expected to generate 14.28 times more return on investment than BG Foods. However, PLANT VEDA is 14.28 times more volatile than BG Foods. It trades about 0.12 of its potential returns per unit of risk. BG Foods is currently generating about -0.02 per unit of risk. If you would invest  11.00  in PLANT VEDA FOODS on October 11, 2024 and sell it today you would lose (9.85) from holding PLANT VEDA FOODS or give up 89.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

PLANT VEDA FOODS  vs.  BG Foods

PLANT VEDA FOODS

Risk-Adjusted Performance

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Very Weak

Over the last 90 days PLANT VEDA FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PLANT VEDA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BG Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PLANT VEDA and BG Foods

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

The idea behind PLANT VEDA FOODS and BG 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.