Correlation Between BGF Latin and BGF Global

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

By analyzing existing cross correlation between BGF Latin American and BGF Global Allocation, you can compare the effects of market volatilities on BGF Latin and BGF Global 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 Latin with a short position of BGF Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Latin and BGF Global.

Diversification Opportunities for BGF Latin and BGF Global

-0.65

Correlation Coefficient

BGF Latin  BGF Global

Excellent diversification

The 3 months correlation between BGF and BGF is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding BGF Latin American and BGF Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Global Allocation and BGF Latin 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 Latin American are associated (or correlated) with BGF Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Global Allocation has no effect on the direction of BGF Latin i.e., BGF Latin and BGF Global go up and down completely randomly.

Pair Corralation between BGF Latin and BGF Global

Assuming the 90 days trading horizon BGF Latin American is expected to under-perform the BGF Global. In addition to that, BGF Latin is 2.26 times more volatile than BGF Global Allocation. It trades about -0.15 of its total potential returns per unit of risk. BGF Global Allocation is currently generating about 0.14 per unit of volatility. If you would invest  7,191  in BGF Global Allocation on October 8, 2024 and sell it today you would earn a total of  416.00  from holding BGF Global Allocation or generate 5.79% return on investment over 90 days.

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

BGF Latin American  vs.  BGF Global Allocation

BGF Latin American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BGF Latin American has generated negative risk-adjusted returns adding no value to fund investors. In spite of unsteady performance in the last few months, the Fund's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

BGF Global Allocation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Global Allocation are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, BGF Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BGF Latin and BGF Global

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

The idea behind BGF Latin American and BGF Global Allocation 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.