Correlation Between Kohls Corp and Industrias Bachoco

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

Diversification Opportunities for Kohls Corp and Industrias Bachoco

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Kohls and Industrias is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kohls Corp and Industrias Bachoco SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Bachoco and Kohls Corp 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 Kohls Corp 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 has no effect on the direction of Kohls Corp i.e., Kohls Corp and Industrias Bachoco go up and down completely randomly.

Pair Corralation between Kohls Corp and Industrias Bachoco

Considering the 90-day investment horizon Kohls Corp is expected to generate 2.08 times less return on investment than Industrias Bachoco. In addition to that, Kohls Corp is 2.35 times more volatile than Industrias Bachoco SA. It trades about 0.01 of its total potential returns per unit of risk. Industrias Bachoco SA is currently generating about 0.03 per unit of volatility. If you would invest  4,257  in Industrias Bachoco SA on August 31, 2022 and sell it today you would earn a total of  1,014  from holding Industrias Bachoco SA or generate 23.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Kohls Corp  vs.  Industrias Bachoco SA

 Performance (%) 
       Timeline  
Kohls Corp 
Kohls Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kohls Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Kohls Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Kohls Price Channel

Industrias Bachoco 
Industrias Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Industrias Bachoco SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish fundamental drivers, Industrias Bachoco may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Industrias Price Channel

Kohls Corp and Industrias Bachoco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kohls Corp and Industrias Bachoco

The main advantage of trading using opposite Kohls Corp and Industrias Bachoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kohls Corp 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 Kohls Corp and Industrias Bachoco SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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