Correlation Between Bridgford Foods and Central Garden

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

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

Diversification Opportunities for Bridgford Foods and Central Garden

0.58

Correlation Coefficient

Bridgford Foods  Central Garden

Very weak diversification

The 3 months correlation between Bridgford and Central is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet and Bridgford Foods 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 Bridgford Foods are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and Central Garden go up and down completely randomly.

Pair Corralation between Bridgford Foods and Central Garden

Given the investment horizon of 90 days Bridgford Foods is expected to generate 13.48 times less return on investment than Central Garden. In addition to that, Bridgford Foods is 1.13 times more volatile than Central Garden Pet. It trades about 0.02 of its total potential returns per unit of risk. Central Garden Pet is currently generating about 0.26 per unit of volatility. If you would invest  2,854  in Central Garden Pet on August 10, 2024 and sell it today you would earn a total of  306.00  from holding Central Garden Pet or generate 10.72% return on investment over 90 days.

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

Bridgford Foods  vs.  Central Garden Pet

Bridgford Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Bridgford Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Central Garden Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Central Garden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bridgford Foods and Central Garden

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

The idea behind Bridgford Foods and Central Garden Pet 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.