Correlation Between Bridgford Foods and Magna International

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

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

Diversification Opportunities for Bridgford Foods and Magna International

0.45

Correlation Coefficient

Bridgford Foods  Magna International

Very weak diversification

The 3 months correlation between Bridgford and Magna is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and Magna International go up and down completely randomly.

Pair Corralation between Bridgford Foods and Magna International

Given the investment horizon of 90 days Bridgford Foods is expected to generate 1.72 times more return on investment than Magna International. However, Bridgford Foods is 1.72 times more volatile than Magna International. It trades about 0.0 of its potential returns per unit of risk. Magna International is currently generating about -0.06 per unit of risk. If you would invest  1,132  in Bridgford Foods on September 20, 2024 and sell it today you would lose (87.00) from holding Bridgford Foods or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.4%
Values	Daily Returns

Bridgford Foods  vs.  Magna International

Bridgford Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Magna International

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Magna International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Magna International 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 Magna International

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

The idea behind Bridgford Foods and Magna International 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.