Correlation Between Treehouse Foods and Grupo Bimbo

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

By analyzing existing cross correlation between Treehouse Foods and Grupo Bimbo SAB, you can compare the effects of market volatilities on Treehouse Foods and Grupo Bimbo 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 Treehouse Foods with a short position of Grupo Bimbo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treehouse Foods and Grupo Bimbo.

Diversification Opportunities for Treehouse Foods and Grupo Bimbo

-0.03

Correlation Coefficient

Treehouse Foods  Grupo Bimbo

Good diversification

The 3 months correlation between Treehouse and Grupo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and Grupo Bimbo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Bimbo SAB and Treehouse 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 Treehouse Foods are associated (or correlated) with Grupo Bimbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Bimbo SAB has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and Grupo Bimbo go up and down completely randomly.

Pair Corralation between Treehouse Foods and Grupo Bimbo

Considering the 90-day investment horizon Treehouse Foods is expected to under-perform the Grupo Bimbo. In addition to that, Treehouse Foods is 1.01 times more volatile than Grupo Bimbo SAB. It trades about -0.13 of its total potential returns per unit of risk. Grupo Bimbo SAB is currently generating about 0.01 per unit of volatility. If you would invest  1,072  in Grupo Bimbo SAB on December 5, 2024 and sell it today you would lose (2.00) from holding Grupo Bimbo SAB or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Treehouse Foods  vs.  Grupo Bimbo SAB

Treehouse Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Treehouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Grupo Bimbo SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Treehouse Foods and Grupo Bimbo

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

The idea behind Treehouse Foods and Grupo Bimbo SAB 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.