Correlation Between PlayD and BGF Retail
Can any of the company-specific risk be diversified away by investing in both PlayD 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 PlayD and BGF Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PlayD Co and BGF Retail Co, you can compare the effects of market volatilities on PlayD 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 PlayD with a short position of BGF Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of PlayD and BGF Retail.
Diversification Opportunities for PlayD and BGF Retail
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PlayD and BGF is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding PlayD 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 PlayD 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 PlayD 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 PlayD i.e., PlayD and BGF Retail go up and down completely randomly.
Pair Corralation between PlayD and BGF Retail
Assuming the 90 days trading horizon PlayD Co is expected to generate 2.12 times more return on investment than BGF Retail. However, PlayD is 2.12 times more volatile than BGF Retail Co. It trades about 0.06 of its potential returns per unit of risk. BGF Retail Co is currently generating about -0.05 per unit of risk. If you would invest 536,000 in PlayD Co on August 29, 2024 and sell it today you would earn a total of 49,000 from holding PlayD Co or generate 9.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PlayD Co vs. BGF Retail Co
Performance |
| Timeline |
| PlayD |
| BGF Retail |
PlayD and BGF Retail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PlayD and BGF Retail
The main advantage of trading using opposite PlayD and BGF Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PlayD 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.The idea behind PlayD Co and BGF Retail Co 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.| BGF Retail vs. Samsung Electronics Co | BGF Retail vs. Samsung Electronics Co | BGF Retail vs. Hyundai Motor Co | BGF Retail vs. Hyundai Motor |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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