Correlation Between BBB Foods and Kenvue

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

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

Diversification Opportunities for BBB Foods and Kenvue

0.01

Correlation Coefficient

BBB Foods  Kenvue

Significant diversification

The 3 months correlation between BBB and Kenvue is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of BBB Foods i.e., BBB Foods and Kenvue go up and down completely randomly.

Pair Corralation between BBB Foods and Kenvue

Given the investment horizon of 90 days BBB Foods is expected to under-perform the Kenvue. In addition to that, BBB Foods is 3.55 times more volatile than Kenvue Inc. It trades about -0.14 of its total potential returns per unit of risk. Kenvue Inc is currently generating about -0.44 per unit of volatility. If you would invest  2,409  in Kenvue Inc on September 22, 2024 and sell it today you would lose (232.00) from holding Kenvue Inc or give up 9.63% of portfolio value over 90 days.

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

BBB Foods  vs.  Kenvue Inc

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.

Kenvue Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kenvue Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Kenvue is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BBB Foods and Kenvue

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

The idea behind BBB Foods and Kenvue Inc 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.