Correlation Between BGF Retail and Hanwha Solutions

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

Diversification Opportunities for BGF Retail and Hanwha Solutions

0.01

Correlation Coefficient

BGF Retail  Hanwha Solutions

Significant diversification

The 3 months correlation between BGF and Hanwha is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Hanwha Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanwha Solutions 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 Hanwha Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanwha Solutions has no effect on the direction of BGF Retail i.e., BGF Retail and Hanwha Solutions go up and down completely randomly.

Pair Corralation between BGF Retail and Hanwha Solutions

Assuming the 90 days trading horizon BGF Retail is expected to generate 2.91 times less return on investment than Hanwha Solutions. But when comparing it to its historical volatility, BGF Retail Co is 2.65 times less risky than Hanwha Solutions. It trades about 0.12 of its potential returns per unit of risk. Hanwha Solutions is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,554,226  in Hanwha Solutions on December 24, 2024 and sell it today you would earn a total of  433,774  from holding Hanwha Solutions or generate 27.91% return on investment over 90 days.

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

BGF Retail Co  vs.  Hanwha Solutions

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.

Hanwha Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanwha Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hanwha Solutions sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Retail and Hanwha Solutions

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

The idea behind BGF Retail Co and Hanwha Solutions 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.