Correlation Between Huadi International and BBB Foods

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

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

Diversification Opportunities for Huadi International and BBB Foods

0.48

Correlation Coefficient

Huadi International  BBB Foods

Very weak diversification

The 3 months correlation between Huadi and BBB is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Huadi International Group and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Huadi International 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 Huadi International Group are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Huadi International i.e., Huadi International and BBB Foods go up and down completely randomly.

Pair Corralation between Huadi International and BBB Foods

Given the investment horizon of 90 days Huadi International is expected to generate 325.69 times less return on investment than BBB Foods. In addition to that, Huadi International is 1.59 times more volatile than BBB Foods. It trades about 0.0 of its total potential returns per unit of risk. BBB Foods is currently generating about 0.18 per unit of volatility. If you would invest  2,873  in BBB Foods on October 14, 2024 and sell it today you would earn a total of  225.00  from holding BBB Foods or generate 7.83% return on investment over 90 days.

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

Huadi International Group  vs.  BBB Foods

Huadi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huadi International and BBB Foods

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

The idea behind Huadi International Group and BBB 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 Transaction History module to view history of all your transactions and understand their impact on performance.