Correlation Between Grupo Bimbo and NightFood Holdings

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

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

Diversification Opportunities for Grupo Bimbo and NightFood Holdings

0.21

Correlation Coefficient

Grupo Bimbo  NightFood Holdings

Modest diversification

The 3 months correlation between Grupo and NightFood is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Bimbo SAB and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings and Grupo Bimbo 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 Grupo Bimbo SAB are associated (or correlated) with NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of Grupo Bimbo i.e., Grupo Bimbo and NightFood Holdings go up and down completely randomly.

Pair Corralation between Grupo Bimbo and NightFood Holdings

Assuming the 90 days horizon Grupo Bimbo SAB is expected to generate 0.18 times more return on investment than NightFood Holdings. However, Grupo Bimbo SAB is 5.46 times less risky than NightFood Holdings. It trades about -0.06 of its potential returns per unit of risk. NightFood Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,162  in Grupo Bimbo SAB on December 4, 2024 and sell it today you would lose (92.00) from holding Grupo Bimbo SAB or give up 7.92% of portfolio value over 90 days.

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

Grupo Bimbo SAB  vs.  NightFood Holdings

Grupo Bimbo SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

NightFood Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days NightFood Holdings 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 nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Grupo Bimbo and NightFood Holdings

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

The idea behind Grupo Bimbo SAB and NightFood Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.