Correlation Between BG Foods and AUTONATION (RWISG)

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

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

Diversification Opportunities for BG Foods and AUTONATION (RWISG)

-0.55

Correlation Coefficient

BG Foods  AUTONATION (RWISG)

Excellent diversification

The 3 months correlation between DHR and AUTONATION is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and AUTONATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUTONATION (RWISG) 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 AUTONATION (RWISG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUTONATION (RWISG) has no effect on the direction of BG Foods i.e., BG Foods and AUTONATION (RWISG) go up and down completely randomly.

Pair Corralation between BG Foods and AUTONATION (RWISG)

Assuming the 90 days trading horizon BG Foods is expected to under-perform the AUTONATION (RWISG). In addition to that, BG Foods is 2.21 times more volatile than AUTONATION. It trades about -0.12 of its total potential returns per unit of risk. AUTONATION is currently generating about 0.05 per unit of volatility. If you would invest  16,645  in AUTONATION on October 11, 2024 and sell it today you would earn a total of  160.00  from holding AUTONATION or generate 0.96% 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.  AUTONATION

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.

AUTONATION (RWISG)

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUTONATION are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AUTONATION (RWISG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BG Foods and AUTONATION (RWISG)

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

The idea behind BG Foods and AUTONATION 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.