Correlation Between J J and BG Foods

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

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

Diversification Opportunities for J J and BG Foods

-0.4

Correlation Coefficient

J J  BG Foods

Very good diversification

The 3 months correlation between JJSF and BGS is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding J J Snack and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and J J 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 J J Snack 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 J J i.e., J J and BG Foods go up and down completely randomly.

Pair Corralation between J J and BG Foods

Given the investment horizon of 90 days J J Snack is expected to under-perform the BG Foods. But the stock apears to be less risky and, when comparing its historical volatility, J J Snack is 1.32 times less risky than BG Foods. The stock trades about -0.17 of its potential returns per unit of risk. The BG Foods is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,129  in BG Foods on January 30, 2024 and sell it today you would lose (24.00) from holding BG Foods or give up 2.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

J J Snack  vs.  BG Foods

J J Snack

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days J J Snack has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BG Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BG Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with J J and BG Foods

The main advantage of trading using opposite J J and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J J 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 J J Snack 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.