Correlation Between BGF World and BGF Euro
Can any of the company-specific risk be diversified away by investing in both BGF World and BGF Euro 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 World and BGF Euro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BGF World Gold and BGF Euro Markets, you can compare the effects of market volatilities on BGF World and BGF Euro 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 World with a short position of BGF Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF World and BGF Euro.
Diversification Opportunities for BGF World and BGF Euro
Very weak diversification
The 3 months correlation between BGF and BGF is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding BGF World Gold and BGF Euro Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Euro Markets and BGF World 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 World Gold are associated (or correlated) with BGF Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Euro Markets has no effect on the direction of BGF World i.e., BGF World and BGF Euro go up and down completely randomly.
Pair Corralation between BGF World and BGF Euro
Assuming the 90 days trading horizon BGF World Gold is expected to generate 1.59 times more return on investment than BGF Euro. However, BGF World is 1.59 times more volatile than BGF Euro Markets. It trades about 0.13 of its potential returns per unit of risk. BGF Euro Markets is currently generating about 0.03 per unit of risk. If you would invest 2,711 in BGF World Gold on September 14, 2024 and sell it today you would earn a total of 1,408 from holding BGF World Gold or generate 51.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.06% |
| Values | Daily Returns |
BGF World Gold vs. BGF Euro Markets
Performance |
| Timeline |
| BGF World Gold |
| BGF Euro Markets |
BGF World and BGF Euro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BGF World and BGF Euro
The main advantage of trading using opposite BGF World and BGF Euro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF World position performs unexpectedly, BGF Euro 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 Euro will offset losses from the drop in BGF Euro's long position.| BGF World vs. Groupama Entreprises N | BGF World vs. Renaissance Europe C | BGF World vs. Superior Plus Corp | BGF World vs. Origin Agritech |
| BGF Euro vs. Groupama Entreprises N | BGF Euro vs. Renaissance Europe C | BGF Euro vs. Superior Plus Corp | BGF Euro vs. Origin Agritech |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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