Correlation Between BGF Retail and Seoul Electronics

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

Diversification Opportunities for BGF Retail and Seoul Electronics

0.08

Correlation Coefficient

BGF Retail  Seoul Electronics

Significant diversification

The 3 months correlation between BGF and Seoul is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Seoul Electronics Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoul Electronics Telecom 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 Seoul Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoul Electronics Telecom has no effect on the direction of BGF Retail i.e., BGF Retail and Seoul Electronics go up and down completely randomly.

Pair Corralation between BGF Retail and Seoul Electronics

Assuming the 90 days trading horizon BGF Retail is expected to generate 4.31 times less return on investment than Seoul Electronics. But when comparing it to its historical volatility, BGF Retail Co is 3.94 times less risky than Seoul Electronics. It trades about 0.05 of its potential returns per unit of risk. Seoul Electronics Telecom is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  23,300  in Seoul Electronics Telecom on December 2, 2024 and sell it today you would earn a total of  1,400  from holding Seoul Electronics Telecom or generate 6.01% 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.  Seoul Electronics Telecom

BGF Retail

Risk-Adjusted Performance

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 somewhat strong basic indicators, BGF Retail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seoul Electronics Telecom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Seoul Electronics Telecom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoul Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BGF Retail and Seoul Electronics

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

The idea behind BGF Retail Co and Seoul Electronics Telecom 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.