Correlation Between Fidus Investment and BBB Foods

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

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

Diversification Opportunities for Fidus Investment and BBB Foods

0.34

Correlation Coefficient

Fidus Investment  BBB Foods

Weak diversification

The 3 months correlation between Fidus and BBB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Fidus Investment 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 Fidus Investment Corp are associated (or correlated) with BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Fidus Investment i.e., Fidus Investment and BBB Foods go up and down completely randomly.

Pair Corralation between Fidus Investment and BBB Foods

Given the investment horizon of 90 days Fidus Investment is expected to generate 3.66 times less return on investment than BBB Foods. But when comparing it to its historical volatility, Fidus Investment Corp is 5.34 times less risky than BBB Foods. It trades about 0.11 of its potential returns per unit of risk. BBB Foods is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,100  in BBB Foods on March 7, 2024 and sell it today you would earn a total of  312.00  from holding BBB Foods or generate 14.86% return on investment over 90 days.

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

Fidus Investment Corp  vs.  BBB Foods

Fidus Investment Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidus Investment is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

BBB Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BBB Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, BBB Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fidus Investment and BBB Foods

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

The idea behind Fidus Investment Corp and BBB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.