Correlation Between Daol Investment and BGF Retail

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

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

Diversification Opportunities for Daol Investment and BGF Retail

0.72

Correlation Coefficient

Daol Investment  BGF Retail

Poor diversification

The 3 months correlation between Daol and BGF is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Daol Investment Securities and BGF Retail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Retail and Daol Investment 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 Daol Investment Securities 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 Daol Investment i.e., Daol Investment and BGF Retail go up and down completely randomly.

Pair Corralation between Daol Investment and BGF Retail

Assuming the 90 days trading horizon Daol Investment Securities is expected to under-perform the BGF Retail. But the stock apears to be less risky and, when comparing its historical volatility, Daol Investment Securities is 1.39 times less risky than BGF Retail. The stock trades about -0.18 of its potential returns per unit of risk. The BGF Retail Co is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  11,660,000  in BGF Retail Co on September 5, 2024 and sell it today you would lose (740,000) from holding BGF Retail Co or give up 6.35% of portfolio value over 90 days.

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

Daol Investment Securities  vs.  BGF Retail Co

Daol Investment Secu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daol Investment Securities 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.

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 Daol Investment and BGF Retail

The main advantage of trading using opposite Daol Investment and BGF Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daol Investment 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 Daol Investment Securities 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.