Correlation Between Branded Legacy and Grupo Bimbo

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

By analyzing existing cross correlation between Branded Legacy and Grupo Bimbo SAB, you can compare the effects of market volatilities on Branded Legacy and Grupo Bimbo 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 Branded Legacy with a short position of Grupo Bimbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Branded Legacy and Grupo Bimbo.

Diversification Opportunities for Branded Legacy and Grupo Bimbo

0.73

Correlation Coefficient

Branded Legacy  Grupo Bimbo

Poor diversification

The 3 months correlation between Branded and Grupo is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Branded Legacy and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB and Branded Legacy 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 Branded Legacy are associated (or correlated) with Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of Branded Legacy i.e., Branded Legacy and Grupo Bimbo go up and down completely randomly.

Pair Corralation between Branded Legacy and Grupo Bimbo

Given the investment horizon of 90 days Branded Legacy is expected to under-perform the Grupo Bimbo. In addition to that, Branded Legacy is 4.91 times more volatile than Grupo Bimbo SAB. It trades about -0.05 of its total potential returns per unit of risk. Grupo Bimbo SAB is currently generating about -0.12 per unit of volatility. If you would invest  300.00  in Grupo Bimbo SAB on September 27, 2024 and sell it today you would lose (28.00) from holding Grupo Bimbo SAB or give up 9.33% of portfolio value over 90 days.

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

Branded Legacy  vs.  Grupo Bimbo SAB

Branded Legacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Branded Legacy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Grupo Bimbo SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Branded Legacy and Grupo Bimbo

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

The idea behind Branded Legacy and Grupo Bimbo SAB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.