Correlation Between Lancaster Colony and Grupo Bimbo

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

By analyzing existing cross correlation between Lancaster Colony and Grupo Bimbo SAB, you can compare the effects of market volatilities on Lancaster Colony and Grupo Bimbo 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 Lancaster Colony with a short position of Grupo Bimbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Grupo Bimbo.

Diversification Opportunities for Lancaster Colony and Grupo Bimbo

0.54

Correlation Coefficient

Lancaster Colony  Grupo Bimbo

Very weak diversification

The 3 months correlation between Lancaster and Grupo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB and Lancaster Colony 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 Lancaster Colony are associated (or correlated) with Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of Lancaster Colony i.e., Lancaster Colony and Grupo Bimbo go up and down completely randomly.

Pair Corralation between Lancaster Colony and Grupo Bimbo

Given the investment horizon of 90 days Lancaster Colony is expected to generate 0.9 times more return on investment than Grupo Bimbo. However, Lancaster Colony is 1.11 times less risky than Grupo Bimbo. It trades about 0.17 of its potential returns per unit of risk. Grupo Bimbo SAB is currently generating about 0.01 per unit of risk. If you would invest  16,916  in Lancaster Colony on December 5, 2024 and sell it today you would earn a total of  2,285  from holding Lancaster Colony or generate 13.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Lancaster Colony  vs.  Grupo Bimbo SAB

Lancaster Colony

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lancaster Colony are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lancaster Colony is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Grupo Bimbo SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lancaster Colony and Grupo Bimbo

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

The idea behind Lancaster Colony and Grupo Bimbo SAB 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.