Correlation Between BBB Foods and Mill City

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

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

Diversification Opportunities for BBB Foods and Mill City

0.02

Correlation Coefficient

BBB Foods  Mill City

Significant diversification

The 3 months correlation between BBB and Mill is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Mill City Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mill City Ventures 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 Mill City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mill City Ventures has no effect on the direction of BBB Foods i.e., BBB Foods and Mill City go up and down completely randomly.

Pair Corralation between BBB Foods and Mill City

Given the investment horizon of 90 days BBB Foods is expected to under-perform the Mill City. But the stock apears to be less risky and, when comparing its historical volatility, BBB Foods is 1.06 times less risky than Mill City. The stock trades about -0.11 of its potential returns per unit of risk. The Mill City Ventures is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  214.00  in Mill City Ventures on September 25, 2024 and sell it today you would lose (16.00) from holding Mill City Ventures or give up 7.48% 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.  Mill City Ventures

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.

Mill City Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mill City Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BBB Foods and Mill City

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

The idea behind BBB Foods and Mill City Ventures 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.