Correlation Between BGF Retail and Seoulin Bioscience

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

Diversification Opportunities for BGF Retail and Seoulin Bioscience

-0.14

Correlation Coefficient

BGF Retail  Seoulin Bioscience

Good diversification

The 3 months correlation between BGF and Seoulin is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Seoulin Bioscience CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seoulin Bioscience CoLtd 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 Seoulin Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seoulin Bioscience CoLtd has no effect on the direction of BGF Retail i.e., BGF Retail and Seoulin Bioscience go up and down completely randomly.

Pair Corralation between BGF Retail and Seoulin Bioscience

Assuming the 90 days trading horizon BGF Retail Co is expected to generate 0.3 times more return on investment than Seoulin Bioscience. However, BGF Retail Co is 3.35 times less risky than Seoulin Bioscience. It trades about 0.18 of its potential returns per unit of risk. Seoulin Bioscience CoLtd is currently generating about 0.02 per unit of risk. If you would invest  9,940,000  in BGF Retail Co on October 8, 2024 and sell it today you would earn a total of  520,000  from holding BGF Retail Co or generate 5.23% return on investment over 90 days.

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

BGF Retail Co  vs.  Seoulin Bioscience CoLtd

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 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.

Seoulin Bioscience CoLtd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seoulin Bioscience CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Seoulin Bioscience sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Retail and Seoulin Bioscience

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

The idea behind BGF Retail Co and Seoulin Bioscience CoLtd 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.