Correlation Between JBS SA and BG Foods

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

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

Diversification Opportunities for JBS SA and BG Foods

0.21

Correlation Coefficient

JBS SA  BG Foods

Modest diversification

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

Pair Corralation between JBS SA and BG Foods

Assuming the 90 days horizon JBS SA is expected to under-perform the BG Foods. In addition to that, JBS SA is 1.82 times more volatile than BG Foods. It trades about -0.12 of its total potential returns per unit of risk. BG Foods is currently generating about -0.2 per unit of volatility. If you would invest  694.00  in BG Foods on October 24, 2024 and sell it today you would lose (45.00) from holding BG Foods or give up 6.48% of portfolio value over 90 days.

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

JBS SA  vs.  BG Foods

JBS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JBS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, JBS SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with JBS SA and BG Foods

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

The idea behind JBS SA and BG 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.