Correlation Between Big Bird and Quice Food

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

By analyzing existing cross correlation between Big Bird Foods and Quice Food Industries, you can compare the effects of market volatilities on Big Bird and Quice Food 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 Big Bird with a short position of Quice Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Bird and Quice Food.

Diversification Opportunities for Big Bird and Quice Food

-0.2

Correlation Coefficient

Big Bird  Quice Food

Good diversification

The 3 months correlation between Big and Quice is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Quice Food Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quice Food Industries and Big Bird 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 Big Bird Foods are associated (or correlated) with Quice Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quice Food Industries has no effect on the direction of Big Bird i.e., Big Bird and Quice Food go up and down completely randomly.

Pair Corralation between Big Bird and Quice Food

Assuming the 90 days trading horizon Big Bird is expected to generate 4.87 times less return on investment than Quice Food. In addition to that, Big Bird is 1.22 times more volatile than Quice Food Industries. It trades about 0.01 of its total potential returns per unit of risk. Quice Food Industries is currently generating about 0.06 per unit of volatility. If you would invest  617.00  in Quice Food Industries on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Quice Food Industries or generate 9.4% return on investment over 90 days.

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

Big Bird Foods  vs.  Quice Food Industries

Big Bird Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Bird Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Big Bird is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Quice Food Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quice Food Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Quice Food may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Big Bird and Quice Food

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

The idea behind Big Bird Foods and Quice Food Industries 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..