Correlation Between BHG Group and Desenio Group

Can any of the company-specific risk be diversified away by investing in both BHG Group and Desenio Group 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 BHG Group and Desenio Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BHG Group AB and Desenio Group AB, you can compare the effects of market volatilities on BHG Group and Desenio Group 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 BHG Group with a short position of Desenio Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHG Group and Desenio Group.

Diversification Opportunities for BHG Group and Desenio Group

-0.28

Correlation Coefficient

BHG Group  Desenio Group

Very good diversification

The 3 months correlation between BHG and Desenio is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding BHG Group AB and Desenio Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desenio Group AB and BHG Group 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 BHG Group AB are associated (or correlated) with Desenio Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desenio Group AB has no effect on the direction of BHG Group i.e., BHG Group and Desenio Group go up and down completely randomly.

Pair Corralation between BHG Group and Desenio Group

Assuming the 90 days trading horizon BHG Group is expected to generate 2.86 times less return on investment than Desenio Group. But when comparing it to its historical volatility, BHG Group AB is 4.04 times less risky than Desenio Group. It trades about 0.12 of its potential returns per unit of risk. Desenio Group AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Desenio Group AB on September 3, 2024 and sell it today you would earn a total of  7.00  from holding Desenio Group AB or generate 28.0% return on investment over 90 days.

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

BHG Group AB  vs.  Desenio Group AB

BHG Group AB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BHG Group AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, BHG Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Desenio Group AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Desenio Group AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Desenio Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BHG Group and Desenio Group

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

The idea behind BHG Group AB and Desenio Group AB 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.