Correlation Between BGF Retail and SH Energy

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

Diversification Opportunities for BGF Retail and SH Energy

-0.55

Correlation Coefficient

BGF Retail  SH Energy

Excellent diversification

The 3 months correlation between BGF and 002360 is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and SH Energy Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SH Energy Chemical 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 SH Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SH Energy Chemical has no effect on the direction of BGF Retail i.e., BGF Retail and SH Energy go up and down completely randomly.

Pair Corralation between BGF Retail and SH Energy

Assuming the 90 days trading horizon BGF Retail Co is expected to generate 0.97 times more return on investment than SH Energy. However, BGF Retail Co is 1.03 times less risky than SH Energy. It trades about 0.12 of its potential returns per unit of risk. SH Energy Chemical is currently generating about -0.14 per unit of risk. If you would invest  10,281,000  in BGF Retail Co on December 24, 2024 and sell it today you would earn a total of  999,000  from holding BGF Retail Co or generate 9.72% return on investment over 90 days.

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

BGF Retail Co  vs.  SH Energy Chemical

BGF Retail

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Retail Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BGF Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SH Energy Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days SH Energy Chemical 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BGF Retail and SH Energy

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

The idea behind BGF Retail Co and SH Energy Chemical 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.