Correlation Between BBB Foods and MSP Recovery

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

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

Diversification Opportunities for BBB Foods and MSP Recovery

0.73

Correlation Coefficient

BBB Foods  MSP Recovery

Poor diversification

The 3 months correlation between BBB and MSP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of BBB Foods i.e., BBB Foods and MSP Recovery go up and down completely randomly.

Pair Corralation between BBB Foods and MSP Recovery

Given the investment horizon of 90 days BBB Foods is expected to generate 3.97 times less return on investment than MSP Recovery. But when comparing it to its historical volatility, BBB Foods is 4.25 times less risky than MSP Recovery. It trades about 0.08 of its potential returns per unit of risk. MSP Recovery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  202.00  in MSP Recovery on October 11, 2024 and sell it today you would earn a total of  8.00  from holding MSP Recovery or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	66.67%
Values	Daily Returns

BBB Foods  vs.  MSP Recovery

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 latest fragile 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.

MSP Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly conflicting technical and fundamental indicators, MSP Recovery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BBB Foods and MSP Recovery

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

The idea behind BBB Foods and MSP Recovery 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.