Correlation Between BLACK and BBB Foods

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

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

Diversification Opportunities for BLACK and BBB Foods

-0.18

Correlation Coefficient

BLACK  BBB Foods

Good diversification

The 3 months correlation between BLACK and BBB is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding BLACK HILLS P and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and BLACK 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 BLACK HILLS P are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of BLACK i.e., BLACK and BBB Foods go up and down completely randomly.

Pair Corralation between BLACK and BBB Foods

Assuming the 90 days trading horizon BLACK HILLS P is expected to under-perform the BBB Foods. But the bond apears to be less risky and, when comparing its historical volatility, BLACK HILLS P is 4.41 times less risky than BBB Foods. The bond trades about -0.13 of its potential returns per unit of risk. The BBB Foods is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,063  in BBB Foods on October 7, 2024 and sell it today you would lose (119.00) from holding BBB Foods or give up 3.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.37%
Values	Daily Returns

BLACK HILLS P  vs.  BBB Foods

BLACK HILLS P

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with BLACK and BBB Foods

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

The idea behind BLACK HILLS P and BBB Foods 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.