Correlation Between Aryzta AG and BG Foods

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

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

Diversification Opportunities for Aryzta AG and BG Foods

0.8

Correlation Coefficient

Aryzta AG  BG Foods

Very poor diversification

The 3 months correlation between Aryzta and BGS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aryzta AG PK and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Aryzta AG 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 Aryzta AG PK 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 Aryzta AG i.e., Aryzta AG and BG Foods go up and down completely randomly.

Pair Corralation between Aryzta AG and BG Foods

Assuming the 90 days horizon Aryzta AG PK is expected to generate 0.9 times more return on investment than BG Foods. However, Aryzta AG PK is 1.12 times less risky than BG Foods. It trades about -0.01 of its potential returns per unit of risk. BG Foods is currently generating about -0.05 per unit of risk. If you would invest  99.00  in Aryzta AG PK on September 7, 2024 and sell it today you would lose (6.00) from holding Aryzta AG PK or give up 6.06% of portfolio value over 90 days.

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

Aryzta AG PK  vs.  BG Foods

Aryzta AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aryzta AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Aryzta AG is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aryzta AG and BG Foods

The main advantage of trading using opposite Aryzta AG and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aryzta AG 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 Aryzta AG PK 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.