Correlation Between Bridgford Foods and Treehouse Foods

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

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

Diversification Opportunities for Bridgford Foods and Treehouse Foods

0.72

Correlation Coefficient

Bridgford Foods  Treehouse Foods

Poor diversification

The 3 months correlation between Bridgford and Treehouse is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and Treehouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treehouse Foods 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 Treehouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treehouse Foods has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and Treehouse Foods go up and down completely randomly.

Pair Corralation between Bridgford Foods and Treehouse Foods

Given the investment horizon of 90 days Bridgford Foods is expected to under-perform the Treehouse Foods. But the stock apears to be less risky and, when comparing its historical volatility, Bridgford Foods is 1.25 times less risky than Treehouse Foods. The stock trades about -0.23 of its potential returns per unit of risk. The Treehouse Foods is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  3,498  in Treehouse Foods on December 30, 2024 and sell it today you would lose (787.00) from holding Treehouse Foods or give up 22.5% of portfolio value over 90 days.

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

Bridgford Foods  vs.  Treehouse Foods

Bridgford Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Treehouse Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treehouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Bridgford Foods and Treehouse Foods

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

The idea behind Bridgford Foods and Treehouse Foods 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 CEOs Directory module to screen CEOs from public companies around the world.