Correlation Between Grocery Outlet and Industrias Bachoco

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

Diversification Opportunities for Grocery Outlet and Industrias Bachoco

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Grocery and Industrias is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding 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 Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Industrias Bachoco go up and down completely randomly.

Pair Corralation between Grocery Outlet and Industrias Bachoco

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Industrias Bachoco. In addition to that, Grocery Outlet is 1.67 times more volatile than Industrias Bachoco SAB. It trades about -0.29 of its total potential returns per unit of risk. Industrias Bachoco SAB is currently generating about 0.03 per unit of volatility. If you would invest  4,944  in Industrias Bachoco SAB on September 9, 2022 and sell it today you would earn a total of  41.00  from holding Industrias Bachoco SAB or generate 0.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Grocery Outlet Holding  vs.  Industrias Bachoco SAB

 Performance (%) 
       Timeline  
Grocery Outlet Holding 
Grocery Performance
0 of 100
Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Grocery 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 current stock price disturbance, may contribute to short-term losses for the investors.

Industrias Price Channel

Grocery Outlet and Industrias Bachoco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grocery Outlet and Industrias Bachoco

The main advantage of trading using opposite Grocery Outlet and Industrias Bachoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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