Correlation Between Saia and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Saia 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 Saia and BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Saia Inc and BBB Foods, you can compare the effects of market volatilities on Saia 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 Saia with a short position of BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saia and BBB Foods.
Diversification Opportunities for Saia and BBB Foods
Weak diversification
The 3 months correlation between Saia and BBB is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Saia Inc and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Saia 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 Saia Inc 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 Saia i.e., Saia and BBB Foods go up and down completely randomly.
Pair Corralation between Saia and BBB Foods
Given the investment horizon of 90 days Saia Inc is expected to generate 1.1 times more return on investment than BBB Foods. However, Saia is 1.1 times more volatile than BBB Foods. It trades about 0.2 of its potential returns per unit of risk. BBB Foods is currently generating about -0.16 per unit of risk. If you would invest 49,133 in Saia Inc on August 31, 2024 and sell it today you would earn a total of 7,305 from holding Saia Inc or generate 14.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Saia Inc vs. BBB Foods
Performance |
| Timeline |
| Saia Inc |
| BBB Foods |
Saia and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Saia and BBB Foods
The main advantage of trading using opposite Saia and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saia 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 Saia Inc 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.| BBB Foods vs. Citizens Bancorp Investment | BBB Foods vs. Stepstone Group | BBB Foods vs. Independence Realty Trust | BBB Foods vs. Western Sierra Mining |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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