Correlation Between Home Center and BGF Retail
Can any of the company-specific risk be diversified away by investing in both Home Center and BGF Retail 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 Home Center and BGF Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Center Holdings and BGF Retail Co, you can compare the effects of market volatilities on Home Center and BGF Retail 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 Home Center with a short position of BGF Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and BGF Retail.
Diversification Opportunities for Home Center and BGF Retail
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and BGF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and BGF Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Retail and Home Center 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 Home Center Holdings are associated (or correlated) with BGF Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Retail has no effect on the direction of Home Center i.e., Home Center and BGF Retail go up and down completely randomly.
Pair Corralation between Home Center and BGF Retail
Assuming the 90 days trading horizon Home Center Holdings is expected to generate 1.0 times more return on investment than BGF Retail. However, Home Center Holdings is 1.0 times less risky than BGF Retail. It trades about -0.04 of its potential returns per unit of risk. BGF Retail Co is currently generating about -0.06 per unit of risk. If you would invest 119,239 in Home Center Holdings on September 3, 2024 and sell it today you would lose (42,539) from holding Home Center Holdings or give up 35.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Center Holdings vs. BGF Retail Co
Performance |
| Timeline |
| Home Center Holdings |
| BGF Retail |
Home Center and BGF Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Center and BGF Retail
The main advantage of trading using opposite Home Center and BGF Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Center position performs unexpectedly, BGF Retail 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 BGF Retail will offset losses from the drop in BGF Retail's long position.| Home Center vs. Aprogen Healthcare Games | Home Center vs. Sejong Telecom | Home Center vs. Daishin Information Communications | Home Center vs. Hanjin Transportation Co |
| BGF Retail vs. LG Display | BGF Retail vs. Hyundai Motor | BGF Retail vs. Hyundai Motor Co | BGF Retail vs. Hyundai Motor Co |
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 the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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