Correlation Between BBB Foods and PACCAR
Can any of the company-specific risk be diversified away by investing in both BBB Foods and PACCAR 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 BBB Foods and PACCAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and PACCAR Inc, you can compare the effects of market volatilities on BBB Foods and PACCAR 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 BBB Foods with a short position of PACCAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and PACCAR.
Diversification Opportunities for BBB Foods and PACCAR
Very weak diversification
The 3 months correlation between BBB and PACCAR is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc and BBB 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 BBB Foods are associated (or correlated) with PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of BBB Foods i.e., BBB Foods and PACCAR go up and down completely randomly.
Pair Corralation between BBB Foods and PACCAR
Given the investment horizon of 90 days BBB Foods is expected to generate 1.93 times more return on investment than PACCAR. However, BBB Foods is 1.93 times more volatile than PACCAR Inc. It trades about 0.09 of its potential returns per unit of risk. PACCAR Inc is currently generating about 0.07 per unit of risk. If you would invest 1,750 in BBB Foods on September 3, 2024 and sell it today you would earn a total of 1,072 from holding BBB Foods or generate 61.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 83.4% |
| Values | Daily Returns |
BBB Foods vs. PACCAR Inc
Performance |
| Timeline |
| BBB Foods |
| PACCAR Inc |
BBB Foods and PACCAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and PACCAR
The main advantage of trading using opposite BBB Foods and PACCAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, PACCAR 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 PACCAR will offset losses from the drop in PACCAR's long position.| BBB Foods vs. NetSol Technologies | BBB Foods vs. Analog Devices | BBB Foods vs. FARO Technologies | BBB Foods vs. Getty Images Holdings |
| PACCAR vs. Manitowoc | PACCAR vs. Alamo Group | PACCAR vs. AGCO Corporation | PACCAR vs. Hyster Yale Materials Handling |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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