Correlation Between BG Foods and Herbalife Nutrition
Can any of the company-specific risk be diversified away by investing in both BG Foods and Herbalife Nutrition 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 BG Foods and Herbalife Nutrition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BG Foods and Herbalife Nutrition, you can compare the effects of market volatilities on BG Foods and Herbalife Nutrition 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 BG Foods with a short position of Herbalife Nutrition. Check out your portfolio center. Please also check ongoing floating volatility patterns of BG Foods and Herbalife Nutrition.
Diversification Opportunities for BG Foods and Herbalife Nutrition
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BGS and Herbalife is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BG Foods and Herbalife Nutrition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herbalife Nutrition and BG 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 BG Foods are associated (or correlated) with Herbalife Nutrition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herbalife Nutrition has no effect on the direction of BG Foods i.e., BG Foods and Herbalife Nutrition go up and down completely randomly.
Pair Corralation between BG Foods and Herbalife Nutrition
Considering the 90-day investment horizon BG Foods is expected to under-perform the Herbalife Nutrition. But the stock apears to be less risky and, when comparing its historical volatility, BG Foods is 1.22 times less risky than Herbalife Nutrition. The stock trades about -0.07 of its potential returns per unit of risk. The Herbalife Nutrition is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 1,086 in Herbalife Nutrition on September 2, 2024 and sell it today you would lose (309.00) from holding Herbalife Nutrition or give up 28.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BG Foods vs. Herbalife Nutrition
Performance |
| Timeline |
| BG Foods |
| Herbalife Nutrition |
BG Foods and Herbalife Nutrition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BG Foods and Herbalife Nutrition
The main advantage of trading using opposite BG Foods and Herbalife Nutrition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BG Foods position performs unexpectedly, Herbalife Nutrition 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 Herbalife Nutrition will offset losses from the drop in Herbalife Nutrition's long position.The idea behind BG Foods and Herbalife Nutrition 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.| Herbalife Nutrition vs. Nomad Foods | Herbalife Nutrition vs. Bellring Brands LLC | Herbalife Nutrition vs. Pilgrims Pride Corp | Herbalife Nutrition vs. Ingredion Incorporated |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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