Correlation Between BBB Foods and Nextracker

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

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

Diversification Opportunities for BBB Foods and Nextracker

-0.21

Correlation Coefficient

BBB Foods  Nextracker

Very good diversification

The 3 months correlation between BBB and Nextracker is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A 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 Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of BBB Foods i.e., BBB Foods and Nextracker go up and down completely randomly.

Pair Corralation between BBB Foods and Nextracker

Given the investment horizon of 90 days BBB Foods is expected to generate 3.62 times less return on investment than Nextracker. But when comparing it to its historical volatility, BBB Foods is 1.19 times less risky than Nextracker. It trades about 0.08 of its potential returns per unit of risk. Nextracker Class A is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,716  in Nextracker Class A on October 11, 2024 and sell it today you would earn a total of  538.00  from holding Nextracker Class A or generate 14.48% return on investment over 90 days.

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

BBB Foods  vs.  Nextracker Class A

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 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.

Nextracker Class A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Nextracker unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BBB Foods and Nextracker

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

The idea behind BBB Foods and Nextracker Class A 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.