Correlation Between Industrias Bachoco and Life Storage

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

Diversification Opportunities for Industrias Bachoco and Life Storage

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Industrias and Life Storage is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Industrias Bachoco SAB and Life Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Life Storage 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 Life Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Life Storage has no effect on the direction of Industrias Bachoco i.e., Industrias Bachoco and Life Storage go up and down completely randomly.

Pair Corralation between Industrias Bachoco and Life Storage

Considering the 90-day investment horizon Industrias Bachoco is expected to generate 1.51 times less return on investment than Life Storage. In addition to that, Industrias Bachoco is 1.01 times more volatile than Life Storage. It trades about 0.03 of its total potential returns per unit of risk. Life Storage is currently generating about 0.05 per unit of volatility. If you would invest  7,563  in Life Storage on September 8, 2022 and sell it today you would earn a total of  2,934  from holding Life Storage or generate 38.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Industrias Bachoco SAB  vs.  Life Storage

 Performance (%) 
       Timeline  
Industrias Bachoco SAB 
Industrias Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Bachoco SAB are ranked lower than 4 (%) 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

Life Storage 
Life Storage Performance
0 of 100
Over the last 90 days Life Storage 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 nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Life Storage Price Channel

Industrias Bachoco and Life Storage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Industrias Bachoco and Life Storage

The main advantage of trading using opposite Industrias Bachoco and Life Storage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrias Bachoco position performs unexpectedly, Life Storage 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 Life Storage will offset losses from the drop in Life Storage's long position.
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The idea behind Industrias Bachoco SAB and Life Storage 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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