Correlation Between General Mills and BRC

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

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

Diversification Opportunities for General Mills and BRC

0.21

Correlation Coefficient

General Mills  BRC

Modest diversification

The 3 months correlation between General and BRC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and BRC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC Inc and General Mills 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 General Mills are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC Inc has no effect on the direction of General Mills i.e., General Mills and BRC go up and down completely randomly.

Pair Corralation between General Mills and BRC

Considering the 90-day investment horizon General Mills is expected to generate 0.5 times more return on investment than BRC. However, General Mills is 1.98 times less risky than BRC. It trades about -0.06 of its potential returns per unit of risk. BRC Inc is currently generating about -0.14 per unit of risk. If you would invest  6,335  in General Mills on December 19, 2024 and sell it today you would lose (415.00) from holding General Mills or give up 6.55% of portfolio value over 90 days.

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

General Mills  vs.  BRC Inc

General Mills

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, General Mills is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BRC Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with General Mills and BRC

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

The idea behind General Mills and BRC Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.