Correlation Between Flowers Foods and Chiba Bank

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

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

Diversification Opportunities for Flowers Foods and Chiba Bank

0.39

Correlation Coefficient

Flowers Foods  Chiba Bank

Weak diversification

The 3 months correlation between Flowers and Chiba is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Flowers Foods and Chiba Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and Flowers 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 Flowers Foods are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Flowers Foods i.e., Flowers Foods and Chiba Bank go up and down completely randomly.

Pair Corralation between Flowers Foods and Chiba Bank

Assuming the 90 days horizon Flowers Foods is expected to under-perform the Chiba Bank. But the stock apears to be less risky and, when comparing its historical volatility, Flowers Foods is 2.26 times less risky than Chiba Bank. The stock trades about -0.41 of its potential returns per unit of risk. The Chiba Bank is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  745.00  in Chiba Bank on September 29, 2024 and sell it today you would lose (10.00) from holding Chiba Bank or give up 1.34% of portfolio value over 90 days.

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

Flowers Foods  vs.  Chiba Bank

Flowers Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flowers Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Flowers Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Chiba Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chiba Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Flowers Foods and Chiba Bank

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

The idea behind Flowers Foods and Chiba Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .