Correlation Between BGF Global and BGF World

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

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

Diversification Opportunities for BGF Global and BGF World

0.03

Correlation Coefficient

BGF Global  BGF World

Significant diversification

The 3 months correlation between BGF and BGF is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and BGF World Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF World Gold and BGF Global 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 Global Allocation are associated (or correlated) with BGF World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF World Gold has no effect on the direction of BGF Global i.e., BGF Global and BGF World go up and down completely randomly.

Pair Corralation between BGF Global and BGF World

Assuming the 90 days trading horizon BGF Global Allocation is expected to under-perform the BGF World. But the fund apears to be less risky and, when comparing its historical volatility, BGF Global Allocation is 2.01 times less risky than BGF World. The fund trades about -0.07 of its potential returns per unit of risk. The BGF World Gold is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,717  in BGF World Gold on December 20, 2024 and sell it today you would earn a total of  853.00  from holding BGF World Gold or generate 22.95% return on investment over 90 days.

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

BGF Global Allocation  vs.  BGF World Gold

BGF Global Allocation

Risk-Adjusted Performance

Very Weak

Over the last 90 days BGF Global Allocation has generated negative risk-adjusted returns adding no value to fund investors. 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.

BGF World Gold

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BGF World Gold are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather unsteady technical and fundamental indicators, BGF World exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BGF Global and BGF World

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

The idea behind BGF Global Allocation and BGF World Gold 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.