Correlation Between BIT Computer and BGF Retail

Can any of the company-specific risk be diversified away by investing in both BIT Computer 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 BIT Computer and BGF Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BIT Computer Co and BGF Retail Co, you can compare the effects of market volatilities on BIT Computer 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 BIT Computer with a short position of BGF Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIT Computer and BGF Retail.

Diversification Opportunities for BIT Computer and BGF Retail

0.55

Correlation Coefficient

BIT Computer  BGF Retail

Very weak diversification

The 3 months correlation between BIT and BGF is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BIT Computer 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 BIT Computer 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 BIT Computer 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 BIT Computer i.e., BIT Computer and BGF Retail go up and down completely randomly.

Pair Corralation between BIT Computer and BGF Retail

Assuming the 90 days trading horizon BIT Computer Co is expected to under-perform the BGF Retail. In addition to that, BIT Computer is 1.26 times more volatile than BGF Retail Co. It trades about -0.04 of its total potential returns per unit of risk. BGF Retail Co is currently generating about 0.0 per unit of volatility. If you would invest  10,940,000  in BGF Retail Co on September 22, 2024 and sell it today you would lose (180,000) from holding BGF Retail Co or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BIT Computer Co  vs.  BGF Retail Co

BIT Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BIT Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BIT Computer is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BGF Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BGF Retail Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BIT Computer and BGF Retail

The main advantage of trading using opposite BIT Computer and BGF Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BIT Computer 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 BIT Computer 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.