Correlation Between BBB Foods and 50249AAA1

Can any of the company-specific risk be diversified away by investing in both BBB Foods and 50249AAA1 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 50249AAA1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BBB Foods and LYB INTERNATIONAL FINANCE, you can compare the effects of market volatilities on BBB Foods and 50249AAA1 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 50249AAA1. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and 50249AAA1.

Diversification Opportunities for BBB Foods and 50249AAA1

0.31

Correlation Coefficient

BBB Foods  50249AAA1

Weak diversification

The 3 months correlation between BBB and 50249AAA1 is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and LYB INTERNATIONAL FINANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LYB INTERNATIONAL FINANCE 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 50249AAA1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LYB INTERNATIONAL FINANCE has no effect on the direction of BBB Foods i.e., BBB Foods and 50249AAA1 go up and down completely randomly.

Pair Corralation between BBB Foods and 50249AAA1

Given the investment horizon of 90 days BBB Foods is expected to generate 2.57 times more return on investment than 50249AAA1. However, BBB Foods is 2.57 times more volatile than LYB INTERNATIONAL FINANCE. It trades about -0.05 of its potential returns per unit of risk. LYB INTERNATIONAL FINANCE is currently generating about -0.15 per unit of risk. If you would invest  3,422  in BBB Foods on October 27, 2024 and sell it today you would lose (340.00) from holding BBB Foods or give up 9.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

BBB Foods  vs.  LYB INTERNATIONAL FINANCE

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 unfluctuating 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.

LYB INTERNATIONAL FINANCE

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days LYB INTERNATIONAL FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for LYB INTERNATIONAL FINANCE investors.

Pair Trading with BBB Foods and 50249AAA1

The main advantage of trading using opposite BBB Foods and 50249AAA1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, 50249AAA1 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 50249AAA1 will offset losses from the drop in 50249AAA1's long position.

The idea behind BBB Foods and LYB INTERNATIONAL FINANCE 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.