Correlation Between African Agriculture and BG Foods

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both African Agriculture 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 African Agriculture and BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Agriculture Holdings and BG Foods, you can compare the effects of market volatilities on African Agriculture 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 African Agriculture with a short position of BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Agriculture and BG Foods.

Diversification Opportunities for African Agriculture and BG Foods

-0.71
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between African and BGS is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding African Agriculture Holdings and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and African Agriculture 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 African Agriculture Holdings 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 African Agriculture i.e., African Agriculture and BG Foods go up and down completely randomly.

Pair Corralation between African Agriculture and BG Foods

Given the investment horizon of 90 days African Agriculture Holdings is expected to generate 7.12 times more return on investment than BG Foods. However, African Agriculture is 7.12 times more volatile than BG Foods. It trades about 0.07 of its potential returns per unit of risk. BG Foods is currently generating about -0.01 per unit of risk. If you would invest  32.00  in African Agriculture Holdings on January 31, 2024 and sell it today you would earn a total of  2.00  from holding African Agriculture Holdings or generate 6.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

African Agriculture Holdings  vs.  BG Foods

 Performance 
       Timeline  
African Agriculture 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days African Agriculture Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
BG Foods 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, BG Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

African Agriculture and BG Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with African Agriculture and BG Foods

The main advantage of trading using opposite African Agriculture and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Agriculture 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 African Agriculture Holdings 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.
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.

Other Complementary Tools

Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Equity Valuation
Check real value of public entities based on technical and fundamental data
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk