Correlation Between Bridgford Foods and Boston Beer

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

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

Diversification Opportunities for Bridgford Foods and Boston Beer

0.06

Correlation Coefficient

Bridgford Foods  Boston Beer

Significant diversification

The 3 months correlation between Bridgford and Boston is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and Boston Beer go up and down completely randomly.

Pair Corralation between Bridgford Foods and Boston Beer

Given the investment horizon of 90 days Bridgford Foods is expected to generate 1.07 times more return on investment than Boston Beer. However, Bridgford Foods is 1.07 times more volatile than Boston Beer. It trades about 0.08 of its potential returns per unit of risk. Boston Beer is currently generating about -0.42 per unit of risk. If you would invest  1,036  in Bridgford Foods on October 11, 2024 and sell it today you would earn a total of  28.00  from holding Bridgford Foods or generate 2.7% return on investment over 90 days.

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

Bridgford Foods  vs.  Boston Beer

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.

Boston Beer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Boston Beer is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bridgford Foods and Boston Beer

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

The idea behind Bridgford Foods and Boston Beer 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.