Correlation Between CROWN and BBB Foods

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

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

Diversification Opportunities for CROWN and BBB Foods

0.1

Correlation Coefficient

CROWN  BBB Foods

Average diversification

The 3 months correlation between CROWN and BBB is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CROWN CASTLE INTL and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and CROWN 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 CROWN CASTLE INTL 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 CROWN i.e., CROWN and BBB Foods go up and down completely randomly.

Pair Corralation between CROWN and BBB Foods

Assuming the 90 days trading horizon CROWN CASTLE INTL is expected to under-perform the BBB Foods. But the bond apears to be less risky and, when comparing its historical volatility, CROWN CASTLE INTL is 2.35 times less risky than BBB Foods. The bond trades about -0.32 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  2,970  in BBB Foods on October 22, 2024 and sell it today you would lose (19.00) from holding BBB Foods or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

CROWN CASTLE INTL  vs.  BBB Foods

CROWN CASTLE INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CROWN CASTLE INTL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CROWN is not utilizing all of its potentials. The current 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 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.

Pair Trading with CROWN and BBB Foods

The main advantage of trading using opposite CROWN and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CROWN 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 CROWN CASTLE INTL 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.