Correlation Between BGF Global and Azvalor Global

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

Diversification Opportunities for BGF Global and Azvalor Global

-0.16

Correlation Coefficient

BGF Global  Azvalor Global

Good diversification

The 3 months correlation between BGF and Azvalor is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and Azvalor Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azvalor Global Value 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 Azvalor Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azvalor Global Value has no effect on the direction of BGF Global i.e., BGF Global and Azvalor Global go up and down completely randomly.

Pair Corralation between BGF Global and Azvalor Global

Assuming the 90 days trading horizon BGF Global is expected to generate 37.92 times less return on investment than Azvalor Global. But when comparing it to its historical volatility, BGF Global Allocation is 70.1 times less risky than Azvalor Global. It trades about 0.07 of its potential returns per unit of risk. Azvalor Global Value is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  19,135  in Azvalor Global Value on October 5, 2024 and sell it today you would lose (44.00) from holding Azvalor Global Value or give up 0.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	43.86%
Values	Daily Returns

BGF Global Allocation  vs.  Azvalor Global Value

BGF Global Allocation

Risk-Adjusted Performance

0 of 100

OK

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Azvalor Global Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azvalor Global Value has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Azvalor Global 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 Global and Azvalor Global

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

The idea behind BGF Global Allocation and Azvalor Global Value 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.