Correlation Between Golden Energy and BBB Foods

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

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

Diversification Opportunities for Golden Energy and BBB Foods

0.58

Correlation Coefficient

Golden Energy  BBB Foods

Very weak diversification

The 3 months correlation between Golden and BBB is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Golden Energy Offshore and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods and Golden Energy 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 Golden Energy Offshore 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 Golden Energy i.e., Golden Energy and BBB Foods go up and down completely randomly.

Pair Corralation between Golden Energy and BBB Foods

Assuming the 90 days horizon Golden Energy Offshore is expected to generate 36.38 times more return on investment than BBB Foods. However, Golden Energy is 36.38 times more volatile than BBB Foods. It trades about 0.13 of its potential returns per unit of risk. BBB Foods is currently generating about 0.16 per unit of risk. If you would invest  14.00  in Golden Energy Offshore on February 26, 2024 and sell it today you would earn a total of  316.00  from holding Golden Energy Offshore or generate 2257.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Golden Energy Offshore  vs.  BBB Foods

Golden Energy Offshore

Risk-Adjusted Performance

9 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Energy Offshore are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Golden Energy reported solid returns over the last few months and may actually be approaching a breakup point.

BBB Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BBB Foods are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish fundamental drivers, BBB Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Energy and BBB Foods

The main advantage of trading using opposite Golden Energy and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Energy 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 Golden Energy Offshore 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.