Correlation Between Central Garden and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Central Garden 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 Central Garden and BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Garden Pet and BBB Foods, you can compare the effects of market volatilities on Central Garden 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 Central Garden with a short position of BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Garden and BBB Foods.
Diversification Opportunities for Central Garden and BBB Foods
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Central and BBB is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Central Garden 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 Central Garden Pet 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 Central Garden i.e., Central Garden and BBB Foods go up and down completely randomly.
Pair Corralation between Central Garden and BBB Foods
Assuming the 90 days horizon Central Garden is expected to generate 12.63 times less return on investment than BBB Foods. But when comparing it to its historical volatility, Central Garden Pet is 1.61 times less risky than BBB Foods. It trades about 0.02 of its potential returns per unit of risk. BBB Foods is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,750 in BBB Foods on August 24, 2024 and sell it today you would earn a total of 1,590 from holding BBB Foods or generate 90.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 40.52% |
| Values | Daily Returns |
Central Garden Pet vs. BBB Foods
Performance |
| Timeline |
| Central Garden Pet |
| BBB Foods |
Central Garden and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Garden and BBB Foods
The main advantage of trading using opposite Central Garden and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden 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.| Central Garden vs. Seneca Foods Corp | Central Garden vs. Natures Sunshine Products | Central Garden vs. J J Snack | Central Garden vs. Central Garden Pet |
| BBB Foods vs. Doubledown Interactive Co | BBB Foods vs. Golden Matrix Group | BBB Foods vs. Boyd Gaming | BBB Foods vs. Playstudios |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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