Correlation Between Central Garden and Bridgford Foods

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

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

Diversification Opportunities for Central Garden and Bridgford Foods

0.57

Correlation Coefficient

Central Garden  Bridgford Foods

Very weak diversification

The 3 months correlation between Central and Bridgford is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods and Central Garden 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 Central Garden Pet are associated (or correlated) with Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of Central Garden i.e., Central Garden and Bridgford Foods go up and down completely randomly.

Pair Corralation between Central Garden and Bridgford Foods

Given the investment horizon of 90 days Central Garden Pet is expected to under-perform the Bridgford Foods. But the stock apears to be less risky and, when comparing its historical volatility, Central Garden Pet is 3.17 times less risky than Bridgford Foods. The stock trades about -0.04 of its potential returns per unit of risk. The Bridgford Foods is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  905.00  in Bridgford Foods on August 10, 2024 and sell it today you would lose (15.00) from holding Bridgford Foods or give up 1.66% of portfolio value over 90 days.

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

Central Garden Pet  vs.  Bridgford Foods

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. In spite of comparatively stable basic indicators, Central Garden is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Central Garden and Bridgford Foods

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

The idea behind Central Garden Pet and Bridgford 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.