Correlation Between BGF Retail and Daol Investment

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

Diversification Opportunities for BGF Retail and Daol Investment

0.72

Correlation Coefficient

BGF Retail  Daol Investment

Poor diversification

The 3 months correlation between BGF and Daol is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Daol Investment Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daol Investment Secu 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 Daol Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daol Investment Secu has no effect on the direction of BGF Retail i.e., BGF Retail and Daol Investment go up and down completely randomly.

Pair Corralation between BGF Retail and Daol Investment

Assuming the 90 days trading horizon BGF Retail Co is expected to generate 1.39 times more return on investment than Daol Investment. However, BGF Retail is 1.39 times more volatile than Daol Investment Securities. It trades about -0.12 of its potential returns per unit of risk. Daol Investment Securities is currently generating about -0.18 per unit of risk. 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

BGF Retail Co  vs.  Daol Investment Securities

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.

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.

Pair Trading with BGF Retail and Daol Investment

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

The idea behind BGF Retail Co and Daol Investment Securities 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.