Correlation Between BG Foods and Aryzta AG

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Can any of the company-specific risk be diversified away by investing in both BG Foods and Aryzta AG 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 BG Foods and Aryzta AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BG Foods and Aryzta AG PK, you can compare the effects of market volatilities on BG Foods and Aryzta AG 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 BG Foods with a short position of Aryzta AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Aryzta AG.

Diversification Opportunities for BG Foods and Aryzta AG

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between BGS and Aryzta is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Aryzta AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aryzta AG PK and BG Foods 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 BG Foods are associated (or correlated) with Aryzta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aryzta AG PK has no effect on the direction of BG Foods i.e., BG Foods and Aryzta AG go up and down completely randomly.

Pair Corralation between BG Foods and Aryzta AG

Considering the 90-day investment horizon BG Foods is expected to generate 1.49 times more return on investment than Aryzta AG. However, BG Foods is 1.49 times more volatile than Aryzta AG PK. It trades about -0.01 of its potential returns per unit of risk. Aryzta AG PK is currently generating about -0.03 per unit of risk. If you would invest  820.00  in BG Foods on September 11, 2024 and sell it today you would lose (64.00) from holding BG Foods or give up 7.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

BG Foods  vs.  Aryzta AG PK

 Performance 
       Timeline  
BG Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 comparatively stable technical and fundamental indicators, BG Foods is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Aryzta AG PK 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 and Aryzta AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BG Foods and Aryzta AG

The main advantage of trading using opposite BG Foods and Aryzta AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods position performs unexpectedly, Aryzta AG 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 Aryzta AG will offset losses from the drop in Aryzta AG's long position.
The idea behind BG Foods and Aryzta AG PK 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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