Correlation Between Big Bird and Organic Meat

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Can any of the company-specific risk be diversified away by investing in both Big Bird and Organic Meat 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 Organic Meat 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 The Organic Meat, you can compare the effects of market volatilities on Big Bird and Organic Meat 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 Organic Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Bird and Organic Meat.

Diversification Opportunities for Big Bird and Organic Meat

BigOrganicDiversified AwayBigOrganicDiversified Away100%
0.2
  Correlation Coefficient

Modest diversification

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

Pair Corralation between Big Bird and Organic Meat

Assuming the 90 days trading horizon Big Bird Foods is expected to under-perform the Organic Meat. In addition to that, Big Bird is 1.67 times more volatile than The Organic Meat. It trades about -0.09 of its total potential returns per unit of risk. The Organic Meat is currently generating about -0.02 per unit of volatility. If you would invest  3,604  in The Organic Meat on October 23, 2024 and sell it today you would lose (127.00) from holding The Organic Meat or give up 3.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Big Bird Foods  vs.  The Organic Meat

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -25-20-15-10-505
JavaScript chart by amCharts 3.21.15BBFL TOMCL
       Timeline  
Big Bird Foods 

Risk-Adjusted Performance

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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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan5055606570
Organic Meat 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Organic Meat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Organic Meat is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan323334353637383940

Big Bird and Organic Meat Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.03-4.52-3.0-1.490.01.382.784.185.58 0.030.040.050.060.070.08
JavaScript chart by amCharts 3.21.15BBFL TOMCL
       Returns  

Pair Trading with Big Bird and Organic Meat

The main advantage of trading using opposite Big Bird and Organic Meat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Bird position performs unexpectedly, Organic Meat 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 Organic Meat will offset losses from the drop in Organic Meat's long position.
The idea behind Big Bird Foods and The Organic Meat 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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