Correlation Between BG Foods and CanSino Biologics

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

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

Diversification Opportunities for BG Foods and CanSino Biologics

-0.52

Correlation Coefficient

BG Foods  CanSino Biologics

Excellent diversification

The 3 months correlation between DHR and CanSino is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and CanSino Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CanSino Biologics 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 CanSino Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CanSino Biologics has no effect on the direction of BG Foods i.e., BG Foods and CanSino Biologics go up and down completely randomly.

Pair Corralation between BG Foods and CanSino Biologics

Assuming the 90 days trading horizon BG Foods is expected to generate 3.72 times less return on investment than CanSino Biologics. But when comparing it to its historical volatility, BG Foods is 1.04 times less risky than CanSino Biologics. It trades about 0.05 of its potential returns per unit of risk. CanSino Biologics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  356.00  in CanSino Biologics on October 5, 2024 and sell it today you would earn a total of  36.00  from holding CanSino Biologics or generate 10.11% return on investment over 90 days.

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

BG Foods  vs.  CanSino Biologics

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CanSino Biologics

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days CanSino Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, CanSino Biologics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BG Foods and CanSino Biologics

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

The idea behind BG Foods and CanSino Biologics 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.