Correlation Between Beyond Meat and BG Foods

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

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

Diversification Opportunities for Beyond Meat and BG Foods

0.51

Correlation Coefficient

Beyond Meat  BG Foods

Very weak diversification

The 3 months correlation between Beyond and BGS is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Beyond Meat and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Beyond Meat 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 Beyond Meat 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 Beyond Meat i.e., Beyond Meat and BG Foods go up and down completely randomly.

Pair Corralation between Beyond Meat and BG Foods

Given the investment horizon of 90 days Beyond Meat is expected to under-perform the BG Foods. In addition to that, Beyond Meat is 1.66 times more volatile than BG Foods. It trades about -0.05 of its total potential returns per unit of risk. BG Foods is currently generating about 0.13 per unit of volatility. If you would invest  921.00  in BG Foods on January 25, 2024 and sell it today you would earn a total of  186.00  from holding BG Foods or generate 20.2% return on investment over 90 days.

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

Beyond Meat  vs.  BG Foods

Beyond Meat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beyond Meat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Beyond Meat is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Beyond Meat and BG Foods

The main advantage of trading using opposite Beyond Meat and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beyond Meat 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 Beyond Meat 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.