Correlation Between DRB Industrial and BGF Retail
Can any of the company-specific risk be diversified away by investing in both DRB Industrial 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 DRB Industrial and BGF Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DRB Industrial Co and BGF Retail Co, you can compare the effects of market volatilities on DRB Industrial 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 DRB Industrial with a short position of BGF Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of DRB Industrial and BGF Retail.
Diversification Opportunities for DRB Industrial and BGF Retail
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DRB and BGF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DRB Industrial Co and BGF Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Retail and DRB Industrial 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 DRB Industrial Co 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 DRB Industrial i.e., DRB Industrial and BGF Retail go up and down completely randomly.
Pair Corralation between DRB Industrial and BGF Retail
Assuming the 90 days trading horizon DRB Industrial Co is expected to generate 0.72 times more return on investment than BGF Retail. However, DRB Industrial Co is 1.39 times less risky than BGF Retail. It trades about 0.21 of its potential returns per unit of risk. BGF Retail Co is currently generating about 0.0 per unit of risk. If you would invest 685,761 in DRB Industrial Co on October 17, 2024 and sell it today you would earn a total of 33,239 from holding DRB Industrial Co or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
DRB Industrial Co vs. BGF Retail Co
Performance |
| Timeline |
| DRB Industrial |
| BGF Retail |
DRB Industrial and BGF Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DRB Industrial and BGF Retail
The main advantage of trading using opposite DRB Industrial and BGF Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRB Industrial 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.| DRB Industrial vs. Sam Yang Foods | DRB Industrial vs. Puloon Technology | DRB Industrial vs. ENF Technology Co | DRB Industrial vs. Seoyon Topmetal Co |
| BGF Retail vs. Drb Industrial | BGF Retail vs. Myoung Shin Industrial | BGF Retail vs. DRB Industrial Co | BGF Retail vs. Lotte Non Life Insurance |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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