Correlation Between BBB Foods and BAKER

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

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

Diversification Opportunities for BBB Foods and BAKER

0.1

Correlation Coefficient

BBB Foods  BAKER

Average diversification

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

Pair Corralation between BBB Foods and BAKER

Given the investment horizon of 90 days BBB Foods is expected to generate 2.59 times more return on investment than BAKER. However, BBB Foods is 2.59 times more volatile than BAKER HUGHES A. It trades about -0.02 of its potential returns per unit of risk. BAKER HUGHES A is currently generating about -0.06 per unit of risk. If you would invest  3,133  in BBB Foods on October 8, 2024 and sell it today you would lose (189.00) from holding BBB Foods or give up 6.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	85.48%
Values	Daily Returns

BBB Foods  vs.  BAKER HUGHES 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 somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

BAKER HUGHES A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAKER HUGHES A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BAKER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BBB Foods and BAKER

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

The idea behind BBB Foods and BAKER HUGHES 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.