Correlation Between Definitive Healthcare and BBB Foods

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

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

Diversification Opportunities for Definitive Healthcare and BBB Foods

-0.22

Correlation Coefficient

Definitive Healthcare  BBB Foods

Very good diversification

The 3 months correlation between Definitive and BBB is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Definitive Healthcare Corp and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Definitive Healthcare 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 Definitive Healthcare Corp 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 Definitive Healthcare i.e., Definitive Healthcare and BBB Foods go up and down completely randomly.

Pair Corralation between Definitive Healthcare and BBB Foods

Allowing for the 90-day total investment horizon Definitive Healthcare Corp is expected to under-perform the BBB Foods. In addition to that, Definitive Healthcare is 1.24 times more volatile than BBB Foods. It trades about -0.03 of its total potential returns per unit of risk. BBB Foods is currently generating about 0.09 per unit of volatility. If you would invest  1,750  in BBB Foods on October 26, 2024 and sell it today you would earn a total of  1,332  from holding BBB Foods or generate 76.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.79%
Values	Daily Returns

Definitive Healthcare Corp  vs.  BBB Foods

Definitive Healthcare

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Definitive Healthcare Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Definitive Healthcare demonstrated 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 latest fragile performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Definitive Healthcare and BBB Foods

The main advantage of trading using opposite Definitive Healthcare and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Definitive Healthcare 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 Definitive Healthcare Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.