Correlation Between Western Acquisition and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Western Acquisition 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 Western Acquisition and BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Acquisition Ventures and BBB Foods, you can compare the effects of market volatilities on Western Acquisition 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 Western Acquisition with a short position of BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Acquisition and BBB Foods.
Diversification Opportunities for Western Acquisition and BBB Foods
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and BBB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Western Acquisition Ventures and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Western Acquisition 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 Western Acquisition Ventures 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 Western Acquisition i.e., Western Acquisition and BBB Foods go up and down completely randomly.
Pair Corralation between Western Acquisition and BBB Foods
Given the investment horizon of 90 days Western Acquisition Ventures is expected to generate 0.56 times more return on investment than BBB Foods. However, Western Acquisition Ventures is 1.78 times less risky than BBB Foods. It trades about -0.15 of its potential returns per unit of risk. BBB Foods is currently generating about -0.16 per unit of risk. If you would invest 1,160 in Western Acquisition Ventures on September 1, 2024 and sell it today you would lose (68.00) from holding Western Acquisition Ventures or give up 5.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Acquisition Ventures vs. BBB Foods
Performance |
| Timeline |
| Western Acquisition |
| BBB Foods |
Western Acquisition and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Acquisition and BBB Foods
The main advantage of trading using opposite Western Acquisition and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Acquisition 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 Western Acquisition Ventures 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. Ingles Markets Incorporated | BBB Foods vs. Sendas Distribuidora SA | BBB Foods vs. Grocery Outlet Holding | BBB Foods vs. Ocado Group plc |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |