Correlation Between WIMFARM SA and BG Foods

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

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

Diversification Opportunities for WIMFARM SA and BG Foods

0.44

Correlation Coefficient

WIMFARM SA  BG Foods

Very weak diversification

The 3 months correlation between WIMFARM and DHR is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding WIMFARM SA EO and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and WIMFARM SA 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 WIMFARM SA EO 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 WIMFARM SA i.e., WIMFARM SA and BG Foods go up and down completely randomly.

Pair Corralation between WIMFARM SA and BG Foods

Assuming the 90 days horizon WIMFARM SA EO is expected to under-perform the BG Foods. In addition to that, WIMFARM SA is 1.07 times more volatile than BG Foods. It trades about -0.01 of its total potential returns per unit of risk. BG Foods is currently generating about -0.01 per unit of volatility. If you would invest  717.00  in BG Foods on October 8, 2024 and sell it today you would lose (31.00) from holding BG Foods or give up 4.32% of portfolio value over 90 days.

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

WIMFARM SA EO  vs.  BG Foods

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WIMFARM SA is not utilizing all of its potentials. The current 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WIMFARM SA and BG Foods

The main advantage of trading using opposite WIMFARM SA and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIMFARM SA 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 WIMFARM SA EO 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.