Correlation Between CM AM and BGF Euro

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

By analyzing existing cross correlation between CM AM Monplus NE and BGF Euro Markets, you can compare the effects of market volatilities on CM AM and BGF Euro 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 CM AM with a short position of BGF Euro. Check out your portfolio center. Please also check ongoing floating volatility patterns of CM AM and BGF Euro.

Diversification Opportunities for CM AM and BGF Euro

0.07

Correlation Coefficient

CM AM  BGF Euro

Significant diversification

The 3 months correlation between 0P0001F96C and BGF is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CM AM Monplus NE and BGF Euro Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Euro Markets and CM AM 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 CM AM Monplus NE are associated (or correlated) with BGF Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Euro Markets has no effect on the direction of CM AM i.e., CM AM and BGF Euro go up and down completely randomly.

Pair Corralation between CM AM and BGF Euro

Assuming the 90 days trading horizon CM AM is expected to generate 1.43 times less return on investment than BGF Euro. But when comparing it to its historical volatility, CM AM Monplus NE is 103.81 times less risky than BGF Euro. It trades about 1.5 of its potential returns per unit of risk. BGF Euro Markets is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,275  in BGF Euro Markets on September 23, 2024 and sell it today you would earn a total of  153.00  from holding BGF Euro Markets or generate 3.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.56%
Values	Daily Returns

CM AM Monplus NE  vs.  BGF Euro Markets

CM AM Monplus

Risk-Adjusted Performance

96 of 100

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in CM AM Monplus NE are ranked lower than 96 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, CM AM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BGF Euro Markets

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Euro Markets are ranked lower than 2 (%) 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.

Pair Trading with CM AM and BGF Euro

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

The idea behind CM AM Monplus NE and BGF Euro Markets 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.