Correlation Between BGF Retail and Busan Ind

Can any of the company-specific risk be diversified away by investing in both BGF Retail and Busan Ind 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 Busan Ind 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 Busan Ind, you can compare the effects of market volatilities on BGF Retail and Busan Ind 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 Busan Ind. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Retail and Busan Ind.

Diversification Opportunities for BGF Retail and Busan Ind

-0.67

Correlation Coefficient

BGF Retail  Busan Ind

Excellent diversification

The 3 months correlation between BGF and Busan is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Busan Ind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Busan Ind 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 Busan Ind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Busan Ind has no effect on the direction of BGF Retail i.e., BGF Retail and Busan Ind go up and down completely randomly.

Pair Corralation between BGF Retail and Busan Ind

Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the Busan Ind. But the stock apears to be less risky and, when comparing its historical volatility, BGF Retail Co is 2.92 times less risky than Busan Ind. The stock trades about -0.12 of its potential returns per unit of risk. The Busan Ind is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,040,000  in Busan Ind on September 13, 2024 and sell it today you would earn a total of  2,740,000  from holding Busan Ind or generate 54.37% return on investment over 90 days.

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

BGF Retail Co  vs.  Busan Ind

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Busan Ind

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Busan Ind are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Busan Ind sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Retail and Busan Ind

The main advantage of trading using opposite BGF Retail and Busan Ind positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF Retail position performs unexpectedly, Busan Ind 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 Busan Ind will offset losses from the drop in Busan Ind's long position.

The idea behind BGF Retail Co and Busan Ind 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.