Correlation Between Air Transport and Bridgford Foods

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

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

Diversification Opportunities for Air Transport and Bridgford Foods

0.26

Correlation Coefficient

Air Transport  Bridgford Foods

Modest diversification

The 3 months correlation between Air and Bridgford is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods and Air Transport 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 Air Transport Services are associated (or correlated) with Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of Air Transport i.e., Air Transport and Bridgford Foods go up and down completely randomly.

Pair Corralation between Air Transport and Bridgford Foods

Given the investment horizon of 90 days Air Transport Services is expected to generate 1.79 times more return on investment than Bridgford Foods. However, Air Transport is 1.79 times more volatile than Bridgford Foods. It trades about 0.17 of its potential returns per unit of risk. Bridgford Foods is currently generating about 0.13 per unit of risk. If you would invest  1,535  in Air Transport Services on September 14, 2024 and sell it today you would earn a total of  656.50  from holding Air Transport Services or generate 42.77% return on investment over 90 days.

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

Air Transport Services  vs.  Bridgford Foods

Air Transport Services

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Bridgford Foods

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Air Transport and Bridgford Foods

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

The idea behind Air Transport Services and Bridgford 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.