Correlation Between Fresh Grapes and BG Foods

Can any of the company-specific risk be diversified away by investing in both Fresh Grapes and BG 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 Fresh Grapes and BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fresh Grapes LLC and BG Foods, you can compare the effects of market volatilities on Fresh Grapes and BG 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 Fresh Grapes with a short position of BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fresh Grapes and BG Foods.

Diversification Opportunities for Fresh Grapes and BG Foods

-0.52

Correlation Coefficient

Fresh Grapes  BG Foods

Excellent diversification

The 3 months correlation between Fresh and BGS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Grapes LLC and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Fresh Grapes 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 Fresh Grapes LLC are associated (or correlated) with BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Fresh Grapes i.e., Fresh Grapes and BG Foods go up and down completely randomly.

Pair Corralation between Fresh Grapes and BG Foods

Given the investment horizon of 90 days Fresh Grapes LLC is expected to under-perform the BG Foods. In addition to that, Fresh Grapes is 3.09 times more volatile than BG Foods. It trades about -0.1 of its total potential returns per unit of risk. BG Foods is currently generating about 0.06 per unit of volatility. If you would invest  1,096  in BG Foods on February 4, 2024 and sell it today you would earn a total of  43.00  from holding BG Foods or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Fresh Grapes LLC  vs.  BG Foods

Fresh Grapes LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresh Grapes LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BG Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, BG Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fresh Grapes and BG Foods

The main advantage of trading using opposite Fresh Grapes and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Grapes position performs unexpectedly, BG 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 BG Foods will offset losses from the drop in BG Foods' long position.

The idea behind Fresh Grapes LLC and BG 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.