Correlation Between JBS SA and Bridgford Foods

Can any of the company-specific risk be diversified away by investing in both JBS SA 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 JBS SA and Bridgford 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 Bridgford Foods, you can compare the effects of market volatilities on JBS SA 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 JBS SA with a short position of Bridgford Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of JBS SA and Bridgford Foods.

Diversification Opportunities for JBS SA and Bridgford Foods

0.11

Correlation Coefficient

JBS SA  Bridgford Foods

Average diversification

The 3 months correlation between JBS and Bridgford is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding JBS SA and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford 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 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 JBS SA i.e., JBS SA and Bridgford Foods go up and down completely randomly.

Pair Corralation between JBS SA and Bridgford Foods

Assuming the 90 days horizon JBS SA is expected to generate 2.74 times more return on investment than Bridgford Foods. However, JBS SA is 2.74 times more volatile than Bridgford Foods. It trades about 0.06 of its potential returns per unit of risk. Bridgford Foods is currently generating about -0.05 per unit of risk. If you would invest  1,313  in JBS SA on December 20, 2024 and sell it today you would earn a total of  132.00  from holding JBS SA or generate 10.05% return on investment over 90 days.

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

JBS SA  vs.  Bridgford Foods

JBS SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, JBS SA showed solid returns over the last few months and may actually be approaching a breakup point.

Bridgford Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bridgford Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Bridgford Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JBS SA and Bridgford Foods

The main advantage of trading using opposite JBS SA and Bridgford Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JBS SA 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 JBS SA 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.