Correlation Between BGF Retail and Rainbow Robotics

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

Diversification Opportunities for BGF Retail and Rainbow Robotics

-0.47

Correlation Coefficient

BGF Retail  Rainbow Robotics

Very good diversification

The 3 months correlation between BGF and Rainbow is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and Rainbow Robotics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rainbow Robotics 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 Rainbow Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rainbow Robotics has no effect on the direction of BGF Retail i.e., BGF Retail and Rainbow Robotics go up and down completely randomly.

Pair Corralation between BGF Retail and Rainbow Robotics

Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the Rainbow Robotics. But the stock apears to be less risky and, when comparing its historical volatility, BGF Retail Co is 2.73 times less risky than Rainbow Robotics. The stock trades about -0.07 of its potential returns per unit of risk. The Rainbow Robotics is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  12,430,000  in Rainbow Robotics on October 24, 2024 and sell it today you would earn a total of  13,620,000  from holding Rainbow Robotics or generate 109.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

BGF Retail Co  vs.  Rainbow Robotics

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.

Rainbow Robotics

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Robotics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rainbow Robotics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Retail and Rainbow Robotics

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

The idea behind BGF Retail Co and Rainbow Robotics 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.