Correlation Between US Dollar and Bridgford Foods

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

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

Diversification Opportunities for US Dollar and Bridgford Foods

0.6

Correlation Coefficient

US Dollar  Bridgford Foods

Poor diversification

The 3 months correlation between DXY and Bridgford is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding US Dollar Currency and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods and US Dollar 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 US Dollar Currency are associated (or correlated) with Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of US Dollar i.e., US Dollar and Bridgford Foods go up and down completely randomly.

Pair Corralation between US Dollar and Bridgford Foods

Assuming the 90 days trading horizon US Dollar Currency is expected to generate 0.29 times more return on investment than Bridgford Foods. However, US Dollar Currency is 3.46 times less risky than Bridgford Foods. It trades about -0.12 of its potential returns per unit of risk. Bridgford Foods is currently generating about -0.07 per unit of risk. If you would invest  10,804  in US Dollar Currency on December 22, 2024 and sell it today you would lose (389.00) from holding US Dollar Currency or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

US Dollar Currency  vs.  Bridgford Foods

Pair Trading with US Dollar and Bridgford Foods

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

The idea behind US Dollar Currency and Bridgford 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 Stocks Directory module to find actively traded stocks across global markets.