Correlation Between MGP Ingredients and Flowers Foods

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

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

Diversification Opportunities for MGP Ingredients and Flowers Foods

-0.4

Correlation Coefficient

MGP Ingredients  Flowers Foods

Very good diversification

The 3 months correlation between MGP and Flowers is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MGP Ingredients and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers Foods and MGP Ingredients 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 MGP Ingredients are associated (or correlated) with Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of MGP Ingredients i.e., MGP Ingredients and Flowers Foods go up and down completely randomly.

Pair Corralation between MGP Ingredients and Flowers Foods

Given the investment horizon of 90 days MGP Ingredients is expected to under-perform the Flowers Foods. In addition to that, MGP Ingredients is 1.49 times more volatile than Flowers Foods. It trades about -0.13 of its total potential returns per unit of risk. Flowers Foods is currently generating about 0.3 per unit of volatility. If you would invest  2,325  in Flowers Foods on January 25, 2024 and sell it today you would earn a total of  177.00  from holding Flowers Foods or generate 7.61% return on investment over 90 days.

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

MGP Ingredients  vs.  Flowers Foods

MGP Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGP Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Flowers Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flowers Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile essential indicators, Flowers Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with MGP Ingredients and Flowers Foods

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

The idea behind MGP Ingredients and Flowers 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.