Correlation Between BBB Foods and World Oil
Can any of the company-specific risk be diversified away by investing in both BBB Foods and World Oil 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 World Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and World Oil Group, you can compare the effects of market volatilities on BBB Foods and World Oil 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 World Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and World Oil.
Diversification Opportunities for BBB Foods and World Oil
Modest diversification
The 3 months correlation between BBB and World is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and World Oil Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Oil Group 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 World Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Oil Group has no effect on the direction of BBB Foods i.e., BBB Foods and World Oil go up and down completely randomly.
Pair Corralation between BBB Foods and World Oil
Given the investment horizon of 90 days BBB Foods is expected to generate 0.25 times more return on investment than World Oil. However, BBB Foods is 4.06 times less risky than World Oil. It trades about -0.11 of its potential returns per unit of risk. World Oil Group is currently generating about -0.14 per unit of risk. If you would invest 2,966 in BBB Foods on December 2, 2024 and sell it today you would lose (304.00) from holding BBB Foods or give up 10.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BBB Foods vs. World Oil Group
Performance |
Timeline |
BBB Foods |
World Oil Group |
BBB Foods and World Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BBB Foods and World Oil
The main advantage of trading using opposite BBB Foods and World Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, World Oil 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 World Oil will offset losses from the drop in World Oil's long position.BBB Foods vs. Renesas Electronics | BBB Foods vs. Cardinal Health | BBB Foods vs. Merit Medical Systems | BBB Foods vs. Teleflex Incorporated |
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Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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