Correlation Between BBB Foods and ESGL Holdings

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

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

Diversification Opportunities for BBB Foods and ESGL Holdings

0.09

Correlation Coefficient

BBB Foods  ESGL Holdings

Significant diversification

The 3 months correlation between BBB and ESGL is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and ESGL Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESGL Holdings Limited 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 ESGL Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESGL Holdings Limited has no effect on the direction of BBB Foods i.e., BBB Foods and ESGL Holdings go up and down completely randomly.

Pair Corralation between BBB Foods and ESGL Holdings

Given the investment horizon of 90 days BBB Foods is expected to under-perform the ESGL Holdings. But the stock apears to be less risky and, when comparing its historical volatility, BBB Foods is 6.32 times less risky than ESGL Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The ESGL Holdings Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.78  in ESGL Holdings Limited on December 26, 2024 and sell it today you would lose (0.65) from holding ESGL Holdings Limited or give up 36.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.77%
Values	Daily Returns

BBB Foods  vs.  ESGL Holdings Limited

BBB Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ESGL Holdings Limited

Risk-Adjusted Performance

Weak

Over the last 90 days ESGL Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady essential indicators, ESGL Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BBB Foods and ESGL Holdings

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

The idea behind BBB Foods and ESGL Holdings Limited 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.