Correlation Between BGF Retail and NICE Total

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

Diversification Opportunities for BGF Retail and NICE Total

0.06

Correlation Coefficient

BGF Retail  NICE Total

Significant diversification

The 3 months correlation between BGF and NICE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and NICE Total Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE Total Cash 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 NICE Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE Total Cash has no effect on the direction of BGF Retail i.e., BGF Retail and NICE Total go up and down completely randomly.

Pair Corralation between BGF Retail and NICE Total

Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the NICE Total. In addition to that, BGF Retail is 1.25 times more volatile than NICE Total Cash. It trades about -0.02 of its total potential returns per unit of risk. NICE Total Cash is currently generating about 0.17 per unit of volatility. If you would invest  456,645  in NICE Total Cash on December 2, 2024 and sell it today you would earn a total of  63,355  from holding NICE Total Cash or generate 13.87% 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.  NICE Total Cash

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.

NICE Total Cash

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NICE Total Cash are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NICE Total sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Retail and NICE Total

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

The idea behind BGF Retail Co and NICE Total Cash 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.