Correlation Between Industrias Bachoco and ConocoPhillips

Can any of the company-specific risk be diversified away by investing in both Industrias Bachoco and ConocoPhillips 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 ConocoPhillips 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 ConocoPhillips, you can compare the effects of market volatilities on Industrias Bachoco and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrias Bachoco and ConocoPhillips.

Diversification Opportunities for Industrias Bachoco and ConocoPhillips

0.85

Correlation Coefficient

Industrias Bachoco  ConocoPhillips

Very poor diversification

The 3 months correlation between Industrias and ConocoPhillips is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Industrias Bachoco SAB and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Industrias Bachoco i.e., Industrias Bachoco and ConocoPhillips go up and down completely randomly.

Pair Corralation between Industrias Bachoco and ConocoPhillips

If you would invest  9,995  in ConocoPhillips on January 26, 2024 and sell it today you would earn a total of  2,933  from holding ConocoPhillips or generate 29.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.4%
Values	Daily Returns

Industrias Bachoco SAB  vs.  ConocoPhillips

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.

ConocoPhillips

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, ConocoPhillips reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrias Bachoco and ConocoPhillips

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

The idea behind Industrias Bachoco SAB and ConocoPhillips 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.