Correlation Between BUA FOODS and ABBEY MORTGAGE

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

By analyzing existing cross correlation between BUA FOODS PLC and ABBEY MORTGAGE BANK, you can compare the effects of market volatilities on BUA FOODS and ABBEY MORTGAGE 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 BUA FOODS with a short position of ABBEY MORTGAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of BUA FOODS and ABBEY MORTGAGE.

Diversification Opportunities for BUA FOODS and ABBEY MORTGAGE

0.56

Correlation Coefficient

BUA FOODS  ABBEY MORTGAGE

Very weak diversification

The 3 months correlation between BUA and ABBEY is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding BUA FOODS PLC and ABBEY MORTGAGE BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABBEY MORTGAGE BANK and BUA 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 BUA FOODS PLC are associated (or correlated) with ABBEY MORTGAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABBEY MORTGAGE BANK has no effect on the direction of BUA FOODS i.e., BUA FOODS and ABBEY MORTGAGE go up and down completely randomly.

Pair Corralation between BUA FOODS and ABBEY MORTGAGE

Assuming the 90 days trading horizon BUA FOODS is expected to generate 5.46 times less return on investment than ABBEY MORTGAGE. But when comparing it to its historical volatility, BUA FOODS PLC is 1.59 times less risky than ABBEY MORTGAGE. It trades about 0.06 of its potential returns per unit of risk. ABBEY MORTGAGE BANK is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  280.00  in ABBEY MORTGAGE BANK on December 25, 2024 and sell it today you would earn a total of  115.00  from holding ABBEY MORTGAGE BANK or generate 41.07% return on investment over 90 days.

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

BUA FOODS PLC  vs.  ABBEY MORTGAGE BANK

BUA FOODS PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BUA FOODS PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, BUA FOODS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ABBEY MORTGAGE BANK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABBEY MORTGAGE BANK are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, ABBEY MORTGAGE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BUA FOODS and ABBEY MORTGAGE

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

The idea behind BUA FOODS PLC and ABBEY MORTGAGE BANK 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..