Correlation Between Halliburton and Industrias Bachoco

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Can any of the company-specific risk be diversified away by investing in both Halliburton and Industrias Bachoco 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 Halliburton and Industrias Bachoco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Halliburton and Industrias Bachoco SAB, you can compare the effects of market volatilities on Halliburton and Industrias Bachoco 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 Halliburton with a short position of Industrias Bachoco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Halliburton and Industrias Bachoco.

Diversification Opportunities for Halliburton and Industrias Bachoco

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Halliburton and Industrias is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Halliburton and Industrias Bachoco SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Bachoco SAB and Halliburton 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 Halliburton are associated (or correlated) with Industrias Bachoco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Bachoco SAB has no effect on the direction of Halliburton i.e., Halliburton and Industrias Bachoco go up and down completely randomly.

Pair Corralation between Halliburton and Industrias Bachoco

Considering the 90-day investment horizon Halliburton is expected to under-perform the Industrias Bachoco. In addition to that, Halliburton is 1.62 times more volatile than Industrias Bachoco SAB. It trades about -0.17 of its total potential returns per unit of risk. Industrias Bachoco SAB is currently generating about 0.0 per unit of volatility. If you would invest  4,972  in Industrias Bachoco SAB on September 10, 2022 and sell it today you would lose (11.00)  from holding Industrias Bachoco SAB or give up 0.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Halliburton  vs.  Industrias Bachoco SAB

 Performance (%) 
       Timeline  
Halliburton 
Halliburton Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Halliburton may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Halliburton Price Channel

Industrias Bachoco SAB 
Industrias Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Bachoco SAB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Industrias Price Channel

Halliburton and Industrias Bachoco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Halliburton and Industrias Bachoco

The main advantage of trading using opposite Halliburton and Industrias Bachoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Halliburton position performs unexpectedly, Industrias Bachoco 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 Industrias Bachoco will offset losses from the drop in Industrias Bachoco's long position.
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The idea behind Halliburton and Industrias Bachoco SAB 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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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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