Correlation Between BG Foods and Darling Ingredients

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

By analyzing existing cross correlation between BG Foods and Darling Ingredients, you can compare the effects of market volatilities on BG Foods and Darling Ingredients 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 Darling Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Darling Ingredients.

Diversification Opportunities for BG Foods and Darling Ingredients

-0.72

Correlation Coefficient

BG Foods  Darling Ingredients

Pay attention - limited upside

The 3 months correlation between BGS and Darling is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Darling Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darling Ingredients 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 Darling Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darling Ingredients has no effect on the direction of BG Foods i.e., BG Foods and Darling Ingredients go up and down completely randomly.

Pair Corralation between BG Foods and Darling Ingredients

Considering the 90-day investment horizon BG Foods is expected to under-perform the Darling Ingredients. In addition to that, BG Foods is 2.41 times more volatile than Darling Ingredients. It trades about -0.19 of its total potential returns per unit of risk. Darling Ingredients is currently generating about 0.01 per unit of volatility. If you would invest  3,980  in Darling Ingredients on September 4, 2024 and sell it today you would lose (7.00) from holding Darling Ingredients or give up 0.18% of portfolio value over 90 days.

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

BG Foods  vs.  Darling Ingredients

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.

Darling Ingredients

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darling Ingredients are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Darling Ingredients is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with BG Foods and Darling Ingredients

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

The idea behind BG Foods and Darling Ingredients 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.