Correlation Between Packages and Big Bird
Can any of the company-specific risk be diversified away by investing in both Packages and Big Bird 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 Packages and Big Bird into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Packages and Big Bird Foods, you can compare the effects of market volatilities on Packages and Big Bird 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 Packages with a short position of Big Bird. Check out your portfolio center. Please also check ongoing floating volatility patterns of Packages and Big Bird.
Diversification Opportunities for Packages and Big Bird
Very good diversification
The 3 months correlation between Packages and Big is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Packages and Big Bird Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Bird Foods and Packages 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 Packages are associated (or correlated) with Big Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Bird Foods has no effect on the direction of Packages i.e., Packages and Big Bird go up and down completely randomly.
Pair Corralation between Packages and Big Bird
Assuming the 90 days trading horizon Packages is expected to generate 2.79 times less return on investment than Big Bird. But when comparing it to its historical volatility, Packages is 1.79 times less risky than Big Bird. It trades about 0.05 of its potential returns per unit of risk. Big Bird Foods is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,232 in Big Bird Foods on August 28, 2024 and sell it today you would earn a total of 1,042 from holding Big Bird Foods or generate 19.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 40.0% |
| Values | Daily Returns |
Packages vs. Big Bird Foods
Performance |
| Timeline |
| Packages |
| Big Bird Foods |
Packages and Big Bird Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Packages and Big Bird
The main advantage of trading using opposite Packages and Big Bird positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Packages position performs unexpectedly, Big Bird 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 Big Bird will offset losses from the drop in Big Bird's long position.| Packages vs. Unilever Pakistan Foods | Packages vs. Pakistan Aluminium Beverage | Packages vs. National Foods | Packages vs. Big Bird Foods |
| Big Bird vs. Habib Insurance | Big Bird vs. Century Insurance | Big Bird vs. Reliance Weaving Mills | Big Bird vs. Media Times |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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