Correlation Between Knife River and Bridgford Foods

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

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

Diversification Opportunities for Knife River and Bridgford Foods

0.54

Correlation Coefficient

Knife River  Bridgford Foods

Very weak diversification

The 3 months correlation between Knife and Bridgford is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods and Knife River 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 Knife River 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 Knife River i.e., Knife River and Bridgford Foods go up and down completely randomly.

Pair Corralation between Knife River and Bridgford Foods

Considering the 90-day investment horizon Knife River is expected to generate 1.13 times more return on investment than Bridgford Foods. However, Knife River is 1.13 times more volatile than Bridgford Foods. It trades about 0.13 of its potential returns per unit of risk. Bridgford Foods is currently generating about 0.1 per unit of risk. If you would invest  8,900  in Knife River on September 21, 2024 and sell it today you would earn a total of  1,671  from holding Knife River or generate 18.78% return on investment over 90 days.

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

Knife River  vs.  Bridgford Foods

Knife River

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

Bridgford Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Bridgford Foods

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

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.