Correlation Between BBB Foods and Enersys

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

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

Diversification Opportunities for BBB Foods and Enersys

0.48

Correlation Coefficient

BBB Foods  Enersys

Very weak diversification

The 3 months correlation between BBB and Enersys is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys and BBB Foods 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 BBB Foods are associated (or correlated) with Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of BBB Foods i.e., BBB Foods and Enersys go up and down completely randomly.

Pair Corralation between BBB Foods and Enersys

Given the investment horizon of 90 days BBB Foods is expected to generate 1.61 times more return on investment than Enersys. However, BBB Foods is 1.61 times more volatile than Enersys. It trades about 0.09 of its potential returns per unit of risk. Enersys is currently generating about 0.03 per unit of risk. If you would invest  1,750  in BBB Foods on September 28, 2024 and sell it today you would earn a total of  1,239  from holding BBB Foods or generate 70.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.75%
Values	Daily Returns

BBB Foods  vs.  Enersys

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Enersys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enersys 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BBB Foods and Enersys

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

The idea behind BBB Foods and Enersys 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.