Correlation Between BBB Foods and Rocky Mountain

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

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

Diversification Opportunities for BBB Foods and Rocky Mountain

-0.1

Correlation Coefficient

BBB Foods  Rocky Mountain

Good diversification

The 3 months correlation between BBB and Rocky is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of BBB Foods i.e., BBB Foods and Rocky Mountain go up and down completely randomly.

Pair Corralation between BBB Foods and Rocky Mountain

Given the investment horizon of 90 days BBB Foods is expected to generate 0.64 times more return on investment than Rocky Mountain. However, BBB Foods is 1.56 times less risky than Rocky Mountain. It trades about 0.06 of its potential returns per unit of risk. Rocky Mountain Chocolate is currently generating about -0.09 per unit of risk. If you would invest  2,944  in BBB Foods on October 10, 2024 and sell it today you would earn a total of  66.00  from holding BBB Foods or generate 2.24% 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.  Rocky Mountain Chocolate

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Rocky Mountain Chocolate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Mountain Chocolate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Rocky Mountain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BBB Foods and Rocky Mountain

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

The idea behind BBB Foods and Rocky Mountain Chocolate 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.