Correlation Between Industrias Bachoco and Bio Rad

Can any of the company-specific risk be diversified away by investing in both Industrias Bachoco and Bio Rad 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 Industrias Bachoco and Bio Rad into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrias Bachoco SAB and Bio Rad Laboratories, you can compare the effects of market volatilities on Industrias Bachoco and Bio Rad 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 Industrias Bachoco with a short position of Bio Rad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrias Bachoco and Bio Rad.

Diversification Opportunities for Industrias Bachoco and Bio Rad

0.23

Correlation Coefficient

Industrias Bachoco  Bio Rad

Modest diversification

The 3 months correlation between Industrias and Bio is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Industrias Bachoco SAB and Bio Rad Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bio Rad Laboratories and Industrias Bachoco 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 Industrias Bachoco SAB are associated (or correlated) with Bio Rad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bio Rad Laboratories has no effect on the direction of Industrias Bachoco i.e., Industrias Bachoco and Bio Rad go up and down completely randomly.

Pair Corralation between Industrias Bachoco and Bio Rad

Considering the 90-day investment horizon Industrias Bachoco SAB is expected to generate 1.34 times more return on investment than Bio Rad. However, Industrias Bachoco is 1.34 times more volatile than Bio Rad Laboratories. It trades about 0.01 of its potential returns per unit of risk. Bio Rad Laboratories is currently generating about -0.07 per unit of risk. If you would invest  5,330  in Industrias Bachoco SAB on January 24, 2024 and sell it today you would lose (30.00) from holding Industrias Bachoco SAB or give up 0.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	13.45%
Values	Daily Returns

Industrias Bachoco SAB  vs.  Bio Rad Laboratories

Industrias Bachoco SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrias Bachoco SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Industrias Bachoco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Bio Rad Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bio Rad Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Industrias Bachoco and Bio Rad

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

The idea behind Industrias Bachoco SAB and Bio Rad Laboratories 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.