Correlation Between BG Foods and Universal

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

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

Diversification Opportunities for BG Foods and Universal

0.42

Correlation Coefficient

BG Foods  Universal

Very weak diversification

The 3 months correlation between BGS and Universal is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of BG Foods i.e., BG Foods and Universal go up and down completely randomly.

Pair Corralation between BG Foods and Universal

Considering the 90-day investment horizon BG Foods is expected to under-perform the Universal. In addition to that, BG Foods is 1.91 times more volatile than Universal. It trades about -0.01 of its total potential returns per unit of risk. Universal is currently generating about 0.07 per unit of volatility. If you would invest  5,348  in Universal on December 28, 2024 and sell it today you would earn a total of  295.00  from holding Universal or generate 5.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

BG Foods  vs.  Universal

BG Foods

Risk-Adjusted Performance

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.

Universal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BG Foods and Universal

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

The idea behind BG Foods and Universal 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.