Correlation Between BGF Euro and Renaissance Europe

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

By analyzing existing cross correlation between BGF Euro Markets and Renaissance Europe C, you can compare the effects of market volatilities on BGF Euro and Renaissance Europe 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 Euro with a short position of Renaissance Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Euro and Renaissance Europe.

Diversification Opportunities for BGF Euro and Renaissance Europe

0.54

Correlation Coefficient

BGF Euro  Renaissance Europe

Very weak diversification

The 3 months correlation between BGF and Renaissance is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding BGF Euro Markets and Renaissance Europe C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renaissance Europe and BGF Euro 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 Euro Markets are associated (or correlated) with Renaissance Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renaissance Europe has no effect on the direction of BGF Euro i.e., BGF Euro and Renaissance Europe go up and down completely randomly.

Pair Corralation between BGF Euro and Renaissance Europe

Assuming the 90 days trading horizon BGF Euro Markets is expected to generate 1.14 times more return on investment than Renaissance Europe. However, BGF Euro is 1.14 times more volatile than Renaissance Europe C. It trades about 0.04 of its potential returns per unit of risk. Renaissance Europe C is currently generating about -0.11 per unit of risk. If you would invest  4,414  in BGF Euro Markets on October 4, 2024 and sell it today you would earn a total of  86.00  from holding BGF Euro Markets or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

BGF Euro Markets  vs.  Renaissance Europe C

BGF Euro Markets

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Euro Markets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, BGF Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Renaissance Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renaissance Europe C has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Renaissance Europe is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BGF Euro and Renaissance Europe

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

The idea behind BGF Euro Markets and Renaissance Europe C 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.