Correlation Between Perma-Fix Environmental and BG Foods

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

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

Diversification Opportunities for Perma-Fix Environmental and BG Foods

-0.26

Correlation Coefficient

Perma-Fix Environmental  BG Foods

Very good diversification

The 3 months correlation between Perma-Fix and DHR is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Perma Fix Environmental Servic and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Perma-Fix Environmental 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 Perma Fix Environmental Services 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 Perma-Fix Environmental i.e., Perma-Fix Environmental and BG Foods go up and down completely randomly.

Pair Corralation between Perma-Fix Environmental and BG Foods

Assuming the 90 days trading horizon Perma Fix Environmental Services is expected to generate 1.37 times more return on investment than BG Foods. However, Perma-Fix Environmental is 1.37 times more volatile than BG Foods. It trades about 0.0 of its potential returns per unit of risk. BG Foods is currently generating about -0.02 per unit of risk. If you would invest  1,110  in Perma Fix Environmental Services on October 7, 2024 and sell it today you would lose (70.00) from holding Perma Fix Environmental Services or give up 6.31% of portfolio value over 90 days.

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

Perma Fix Environmental Servic  vs.  BG Foods

Perma Fix Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Perma Fix Environmental Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Perma-Fix Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 rather sound basic indicators, BG 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 Perma-Fix Environmental and BG Foods

The main advantage of trading using opposite Perma-Fix Environmental and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perma-Fix Environmental 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 Perma Fix Environmental Services 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.