Correlation Between HE Equipment and BBB Foods
Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and BBB Foods, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and BBB Foods.
Diversification Opportunities for HE Equipment and BBB Foods
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HEES and BBB is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and BBB Foods go up and down completely randomly.
Pair Corralation between HE Equipment and BBB Foods
Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.01 times more return on investment than BBB Foods. However, HE Equipment is 1.01 times more volatile than BBB Foods. It trades about 0.21 of its potential returns per unit of risk. BBB Foods is currently generating about -0.16 per unit of risk. If you would invest 5,225 in HE Equipment Services on September 1, 2024 and sell it today you would earn a total of 749.00 from holding HE Equipment Services or generate 14.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. BBB Foods
Performance |
| Timeline |
| HE Equipment Services |
| BBB Foods |
HE Equipment and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and BBB Foods
The main advantage of trading using opposite HE Equipment and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.| HE Equipment vs. McGrath RentCorp | HE Equipment vs. Herc Holdings | HE Equipment vs. PROG Holdings | HE Equipment vs. Custom Truck One |
| BBB Foods vs. Ingles Markets Incorporated | BBB Foods vs. Grocery Outlet Holding | BBB Foods vs. Ocado Group plc | BBB Foods vs. Sprouts Farmers Market |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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