Correlation Between Simply Good and BG Foods

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

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

Diversification Opportunities for Simply Good and BG Foods

-0.39

Correlation Coefficient

Simply Good  BG Foods

Very good diversification

The 3 months correlation between Simply and BGS is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Simply Good Foods and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Simply Good 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 Simply Good Foods 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 Simply Good i.e., Simply Good and BG Foods go up and down completely randomly.

Pair Corralation between Simply Good and BG Foods

Given the investment horizon of 90 days Simply Good Foods is expected to generate 1.17 times more return on investment than BG Foods. However, Simply Good is 1.17 times more volatile than BG Foods. It trades about 0.35 of its potential returns per unit of risk. BG Foods is currently generating about 0.1 per unit of risk. If you would invest  3,227  in Simply Good Foods on February 8, 2024 and sell it today you would earn a total of  503.00  from holding Simply Good Foods or generate 15.59% return on investment over 90 days.

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

Simply Good Foods  vs.  BG Foods

Simply Good Foods

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Simply Good Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Simply Good is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BG Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal 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 Simply Good and BG Foods

The main advantage of trading using opposite Simply Good and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simply Good 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 Simply Good Foods 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 CEOs Directory module to screen CEOs from public companies around the world.