Correlation Between Bridgford Foods and CarsalesCom

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

By analyzing existing cross correlation between Bridgford Foods and CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Bridgford Foods and CarsalesCom 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 Bridgford Foods with a short position of CarsalesCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgford Foods and CarsalesCom.

Diversification Opportunities for Bridgford Foods and CarsalesCom

0.31

Correlation Coefficient

Bridgford Foods  CarsalesCom

Weak diversification

The 3 months correlation between Bridgford and CarsalesCom is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR and Bridgford 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 Bridgford Foods are associated (or correlated) with CarsalesCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and CarsalesCom go up and down completely randomly.

Pair Corralation between Bridgford Foods and CarsalesCom

Given the investment horizon of 90 days Bridgford Foods is expected to generate 0.7 times more return on investment than CarsalesCom. However, Bridgford Foods is 1.43 times less risky than CarsalesCom. It trades about 0.15 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about -0.03 per unit of risk. If you would invest  900.00  in Bridgford Foods on September 30, 2024 and sell it today you would earn a total of  176.00  from holding Bridgford Foods or generate 19.56% return on investment over 90 days.

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

Bridgford Foods  vs.  CarsalesCom Ltd ADR

Bridgford Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, CarsalesCom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bridgford Foods and CarsalesCom

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

The idea behind Bridgford Foods and CarsalesCom Ltd ADR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.