Correlation Between BGF Global and BGF World
Can any of the company-specific risk be diversified away by investing in both BGF Global and BGF World 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 Global and BGF World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BGF Global Allocation and BGF World Gold, you can compare the effects of market volatilities on BGF Global and BGF World 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 Global with a short position of BGF World. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Global and BGF World.
Diversification Opportunities for BGF Global and BGF World
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BGF and BGF is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and BGF World Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF World Gold and BGF Global 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 Global Allocation are associated (or correlated) with BGF World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF World Gold has no effect on the direction of BGF Global i.e., BGF Global and BGF World go up and down completely randomly.
Pair Corralation between BGF Global and BGF World
Assuming the 90 days trading horizon BGF Global is expected to generate 4.25 times less return on investment than BGF World. But when comparing it to its historical volatility, BGF Global Allocation is 2.11 times less risky than BGF World. It trades about 0.05 of its potential returns per unit of risk. BGF World Gold is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,711 in BGF World Gold on December 4, 2024 and sell it today you would earn a total of 1,517 from holding BGF World Gold or generate 55.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BGF Global Allocation vs. BGF World Gold
Performance |
| Timeline |
| BGF Global Allocation |
| BGF World Gold |
BGF Global and BGF World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BGF Global and BGF World
The main advantage of trading using opposite BGF Global and BGF World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF Global position performs unexpectedly, BGF World 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 World will offset losses from the drop in BGF World's long position.| BGF Global vs. BGF World Gold | BGF Global vs. BGF Global Allocation | BGF Global vs. BGF Euro Markets | BGF Global vs. BGF Latin American |
| BGF World vs. R co Thematic Silver | BGF World vs. Esfera Robotics R | BGF World vs. R co Valor F | BGF World vs. CM AM Monplus NE |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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