Correlation Between Pop Culture and BBB Foods

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

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

Diversification Opportunities for Pop Culture and BBB Foods

0.42

Correlation Coefficient

Pop Culture  BBB Foods

Very weak diversification

The 3 months correlation between Pop and BBB is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Pop Culture Group and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Pop Culture 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 Pop Culture Group are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Pop Culture i.e., Pop Culture and BBB Foods go up and down completely randomly.

Pair Corralation between Pop Culture and BBB Foods

Given the investment horizon of 90 days Pop Culture Group is expected to generate 1.9 times more return on investment than BBB Foods. However, Pop Culture is 1.9 times more volatile than BBB Foods. It trades about 0.05 of its potential returns per unit of risk. BBB Foods is currently generating about -0.03 per unit of risk. If you would invest  117.00  in Pop Culture Group on October 10, 2024 and sell it today you would earn a total of  11.00  from holding Pop Culture Group or generate 9.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Pop Culture Group  vs.  BBB Foods

Pop Culture Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pop Culture Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Pop Culture reported solid returns over the last few months and may actually be approaching a breakup point.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pop Culture and BBB Foods

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

The idea behind Pop Culture Group and BBB 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.