Correlation Between BGF Retail and HANA Micron

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

Diversification Opportunities for BGF Retail and HANA Micron

0.78

Correlation Coefficient

BGF Retail  HANA Micron

Poor diversification

The 3 months correlation between BGF and HANA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and HANA Micron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANA Micron 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 HANA Micron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANA Micron has no effect on the direction of BGF Retail i.e., BGF Retail and HANA Micron go up and down completely randomly.

Pair Corralation between BGF Retail and HANA Micron

Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the HANA Micron. But the stock apears to be less risky and, when comparing its historical volatility, BGF Retail Co is 1.6 times less risky than HANA Micron. The stock trades about -0.11 of its potential returns per unit of risk. The HANA Micron is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,106,000  in HANA Micron on September 15, 2024 and sell it today you would lose (142,000) from holding HANA Micron or give up 12.84% of portfolio value over 90 days.

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

BGF Retail Co  vs.  HANA Micron

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.

HANA Micron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HANA Micron 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 BGF Retail and HANA Micron

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

The idea behind BGF Retail Co and HANA Micron 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.