Correlation Between BGF Retail and Miwon Chemicals

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

Diversification Opportunities for BGF Retail and Miwon Chemicals

-0.11

Correlation Coefficient

BGF Retail  Miwon Chemicals

Good diversification

The 3 months correlation between BGF and Miwon is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Miwon Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miwon Chemicals 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 Miwon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miwon Chemicals has no effect on the direction of BGF Retail i.e., BGF Retail and Miwon Chemicals go up and down completely randomly.

Pair Corralation between BGF Retail and Miwon Chemicals

Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the Miwon Chemicals. In addition to that, BGF Retail is 1.91 times more volatile than Miwon Chemicals Co. It trades about -0.06 of its total potential returns per unit of risk. Miwon Chemicals Co is currently generating about 0.06 per unit of volatility. If you would invest  5,816,396  in Miwon Chemicals Co on October 27, 2024 and sell it today you would earn a total of  1,913,604  from holding Miwon Chemicals Co or generate 32.9% 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.  Miwon Chemicals Co

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.

Miwon Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Miwon Chemicals Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Miwon Chemicals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BGF Retail and Miwon Chemicals

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

The idea behind BGF Retail Co and Miwon Chemicals Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.