Correlation Between Park National and BBB Foods

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

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

Diversification Opportunities for Park National and BBB Foods

-0.07

Correlation Coefficient

Park National  BBB Foods

Good diversification

The 3 months correlation between Park and BBB is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Park National and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Park National 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 Park National are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Park National i.e., Park National and BBB Foods go up and down completely randomly.

Pair Corralation between Park National and BBB Foods

Considering the 90-day investment horizon Park National is expected to under-perform the BBB Foods. But the stock apears to be less risky and, when comparing its historical volatility, Park National is 1.49 times less risky than BBB Foods. The stock trades about -0.28 of its potential returns per unit of risk. The BBB Foods is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,810  in BBB Foods on October 5, 2024 and sell it today you would earn a total of  134.00  from holding BBB Foods or generate 4.77% return on investment over 90 days.

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

Park National  vs.  BBB Foods

Park National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Park National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Park National and BBB Foods

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

The idea behind Park National and BBB 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.