Correlation Between BBB Foods and Sea
Can any of the company-specific risk be diversified away by investing in both BBB Foods and Sea 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 Sea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and Sea, you can compare the effects of market volatilities on BBB Foods and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and Sea.
Diversification Opportunities for BBB Foods and Sea
Very weak diversification
The 3 months correlation between BBB and Sea is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of BBB Foods i.e., BBB Foods and Sea go up and down completely randomly.
Pair Corralation between BBB Foods and Sea
Given the investment horizon of 90 days BBB Foods is expected to generate 1.4 times less return on investment than Sea. In addition to that, BBB Foods is 1.06 times more volatile than Sea. It trades about 0.09 of its total potential returns per unit of risk. Sea is currently generating about 0.13 per unit of volatility. If you would invest 4,176 in Sea on August 29, 2024 and sell it today you would earn a total of 7,395 from holding Sea or generate 177.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 70.1% |
| Values | Daily Returns |
BBB Foods vs. Sea
Performance |
| Timeline |
| BBB Foods |
| Sea |
BBB Foods and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and Sea
The main advantage of trading using opposite BBB Foods and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| BBB Foods vs. BJs Wholesale Club | BBB Foods vs. Dollar General | BBB Foods vs. Dollar Tree | BBB Foods vs. Target |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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