Correlation Between BGF Global and BGF Euro

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

Diversification Opportunities for BGF Global and BGF Euro

0.34

Correlation Coefficient

BGF Global  BGF Euro

Weak diversification

The 3 months correlation between BGF and BGF is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and BGF Euro Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BGF Euro Markets 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 Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BGF Euro Markets has no effect on the direction of BGF Global i.e., BGF Global and BGF Euro go up and down completely randomly.

Pair Corralation between BGF Global and BGF Euro

Assuming the 90 days trading horizon BGF Global is expected to generate 19.26 times less return on investment than BGF Euro. But when comparing it to its historical volatility, BGF Global Allocation is 1.24 times less risky than BGF Euro. It trades about 0.01 of its potential returns per unit of risk. BGF Euro Markets is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,428  in BGF Euro Markets on December 20, 2024 and sell it today you would earn a total of  487.00  from holding BGF Euro Markets or generate 11.0% return on investment over 90 days.

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

BGF Global Allocation  vs.  BGF Euro Markets

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 Euro Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Euro Markets are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, BGF Euro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with BGF Global and BGF Euro

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

The idea behind BGF Global Allocation and BGF Euro Markets 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.