Correlation Between BGF Euro and R Co

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

Diversification Opportunities for BGF Euro and R Co

0.5

Correlation Coefficient

BGF Euro  R Co

Very weak diversification

The 3 months correlation between BGF and 0P00017SX2 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BGF Euro Markets and R co Valor F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R co Valor 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 R Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R co Valor has no effect on the direction of BGF Euro i.e., BGF Euro and R Co go up and down completely randomly.

Pair Corralation between BGF Euro and R Co

Assuming the 90 days trading horizon BGF Euro is expected to generate 2.49 times less return on investment than R Co. In addition to that, BGF Euro is 1.6 times more volatile than R co Valor F. It trades about 0.06 of its total potential returns per unit of risk. R co Valor F is currently generating about 0.25 per unit of volatility. If you would invest  280,325  in R co Valor F on September 15, 2024 and sell it today you would earn a total of  31,528  from holding R co Valor F or generate 11.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

BGF Euro Markets  vs.  R co Valor F

BGF Euro Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Euro Markets are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, BGF Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

R co Valor

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat fragile basic indicators, R Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BGF Euro and R Co

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

The idea behind BGF Euro Markets and R co Valor F 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.