Correlation Between BGF Euro and BGF World
Can any of the company-specific risk be diversified away by investing in both BGF Euro 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 Euro 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 Euro Markets and BGF World Gold, you can compare the effects of market volatilities on BGF Euro 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 Euro with a short position of BGF World. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Euro and BGF World.
Diversification Opportunities for BGF Euro and BGF World
Good diversification
The 3 months correlation between BGF and BGF is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding BGF Euro Markets 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 Euro 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 Euro Markets 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 Euro i.e., BGF Euro and BGF World go up and down completely randomly.
Pair Corralation between BGF Euro and BGF World
Assuming the 90 days trading horizon BGF Euro is expected to generate 1.31 times less return on investment than BGF World. But when comparing it to its historical volatility, BGF Euro Markets is 2.17 times less risky than BGF World. It trades about 0.31 of its potential returns per unit of risk. BGF World Gold is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,759 in BGF World Gold on October 20, 2024 and sell it today you would earn a total of 218.00 from holding BGF World Gold or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BGF Euro Markets vs. BGF World Gold
Performance |
| Timeline |
| BGF Euro Markets |
| BGF World Gold |
BGF Euro and BGF World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BGF Euro and BGF World
The main advantage of trading using opposite BGF Euro and BGF World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF Euro 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 Euro vs. Groupama Entreprises N | BGF Euro vs. Renaissance Europe C | BGF Euro vs. Superior Plus Corp | BGF Euro vs. Intel |
| BGF World vs. Groupama Entreprises N | BGF World vs. Renaissance Europe C | BGF World vs. Superior Plus Corp | BGF World vs. Intel |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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