Correlation Between BGF Retail and Microfriend
Can any of the company-specific risk be diversified away by investing in both BGF Retail and Microfriend 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 BGF Retail and Microfriend into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BGF Retail Co and Microfriend, you can compare the effects of market volatilities on BGF Retail and Microfriend 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 BGF Retail with a short position of Microfriend. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Retail and Microfriend.
Diversification Opportunities for BGF Retail and Microfriend
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BGF and Microfriend is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Microfriend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microfriend and BGF Retail 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 BGF Retail Co are associated (or correlated) with Microfriend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microfriend has no effect on the direction of BGF Retail i.e., BGF Retail and Microfriend go up and down completely randomly.
Pair Corralation between BGF Retail and Microfriend
Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the Microfriend. But the stock apears to be less risky and, when comparing its historical volatility, BGF Retail Co is 1.96 times less risky than Microfriend. The stock trades about -0.06 of its potential returns per unit of risk. The Microfriend is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 512,000 in Microfriend on October 13, 2024 and sell it today you would lose (206,000) from holding Microfriend or give up 40.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
BGF Retail Co vs. Microfriend
Performance |
| Timeline |
| BGF Retail |
| Microfriend |
BGF Retail and Microfriend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BGF Retail and Microfriend
The main advantage of trading using opposite BGF Retail and Microfriend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF Retail position performs unexpectedly, Microfriend 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 Microfriend will offset losses from the drop in Microfriend's long position.| BGF Retail vs. CKH Food Health | BGF Retail vs. Shinsegae Food | BGF Retail vs. Sajo Seafood | BGF Retail vs. Sam Yang Foods |
| Microfriend vs. Samsung Publishing Co | Microfriend vs. InfoBank | Microfriend vs. BGF Retail Co | Microfriend vs. Osang Healthcare Co,Ltd |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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