Correlation Between BG Foods and Broadwind

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

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

Diversification Opportunities for BG Foods and Broadwind

0.7

Correlation Coefficient

BG Foods  Broadwind

Poor diversification

The 3 months correlation between DHR and Broadwind is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and BG 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 BG Foods are associated (or correlated) with Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of BG Foods i.e., BG Foods and Broadwind go up and down completely randomly.

Pair Corralation between BG Foods and Broadwind

Assuming the 90 days trading horizon BG Foods is expected to under-perform the Broadwind. But the stock apears to be less risky and, when comparing its historical volatility, BG Foods is 1.29 times less risky than Broadwind. The stock trades about -0.06 of its potential returns per unit of risk. The Broadwind is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Broadwind on October 6, 2024 and sell it today you would earn a total of  9.00  from holding Broadwind or generate 4.92% return on investment over 90 days.

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

BG Foods  vs.  Broadwind

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BG Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Broadwind

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Broadwind are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadwind may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BG Foods and Broadwind

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

The idea behind BG Foods and Broadwind 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.