Correlation Between General Mills and Associated British

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Can any of the company-specific risk be diversified away by investing in both General Mills and Associated British 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 General Mills and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Mills and Associated British Foods, you can compare the effects of market volatilities on General Mills and Associated British 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 General Mills with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Mills and Associated British.

Diversification Opportunities for General Mills and Associated British

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Associated is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and General Mills 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 General Mills are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of General Mills i.e., General Mills and Associated British go up and down completely randomly.

Pair Corralation between General Mills and Associated British

Considering the 90-day investment horizon General Mills is expected to under-perform the Associated British. But the stock apears to be less risky and, when comparing its historical volatility, General Mills is 1.43 times less risky than Associated British. The stock trades about -0.01 of its potential returns per unit of risk. The Associated British Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,397  in Associated British Foods on December 29, 2023 and sell it today you would earn a total of  1,778  from holding Associated British Foods or generate 127.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.73%
ValuesDaily Returns

General Mills  vs.  Associated British Foods

 Performance 
       Timeline  
General Mills 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward indicators, General Mills may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Associated British Foods 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Associated British is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

General Mills and Associated British Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Mills and Associated British

The main advantage of trading using opposite General Mills and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.
The idea behind General Mills and Associated British 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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