Correlation Between BBB Foods and Topaz

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

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

Diversification Opportunities for BBB Foods and Topaz

0.76

Correlation Coefficient

BBB Foods  Topaz

Poor diversification

The 3 months correlation between BBB and Topaz is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Topaz Solar Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Solar Farms 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 Topaz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Solar Farms has no effect on the direction of BBB Foods i.e., BBB Foods and Topaz go up and down completely randomly.

Pair Corralation between BBB Foods and Topaz

Given the investment horizon of 90 days BBB Foods is expected to under-perform the Topaz. In addition to that, BBB Foods is 5.31 times more volatile than Topaz Solar Farms. It trades about -0.08 of its total potential returns per unit of risk. Topaz Solar Farms is currently generating about 0.04 per unit of volatility. If you would invest  9,756  in Topaz Solar Farms on December 24, 2024 and sell it today you would earn a total of  59.00  from holding Topaz Solar Farms or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	60.0%
Values	Daily Returns

BBB Foods  vs.  Topaz Solar Farms

BBB Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Topaz Solar Farms

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Topaz Solar Farms are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Topaz 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 Topaz

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

The idea behind BBB Foods and Topaz Solar Farms 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.