Correlation Between BGF Retail and HB Technology

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

Diversification Opportunities for BGF Retail and HB Technology

-0.35

Correlation Coefficient

BGF Retail  HB Technology

Very good diversification

The 3 months correlation between BGF and 078150 is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and HB Technology TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HB Technology TD 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 HB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HB Technology TD has no effect on the direction of BGF Retail i.e., BGF Retail and HB Technology go up and down completely randomly.

Pair Corralation between BGF Retail and HB Technology

Assuming the 90 days trading horizon BGF Retail is expected to generate 1.13 times less return on investment than HB Technology. But when comparing it to its historical volatility, BGF Retail Co is 2.61 times less risky than HB Technology. It trades about 0.12 of its potential returns per unit of risk. HB Technology TD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  194,700  in HB Technology TD on December 30, 2024 and sell it today you would earn a total of  16,300  from holding HB Technology TD or generate 8.37% 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.  HB Technology TD

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.

HB Technology TD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HB Technology TD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HB Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Retail and HB Technology

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

The idea behind BGF Retail Co and HB Technology TD 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.