Correlation Between BGF Global and FF Global

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

Diversification Opportunities for BGF Global and FF Global

0.87

Correlation Coefficient

BGF Global  FF Global

Very poor diversification

The 3 months correlation between BGF and FJ2P is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and FF Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF Global 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 FF Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF Global has no effect on the direction of BGF Global i.e., BGF Global and FF Global go up and down completely randomly.

Pair Corralation between BGF Global and FF Global

Assuming the 90 days trading horizon BGF Global is expected to generate 1.83 times less return on investment than FF Global. But when comparing it to its historical volatility, BGF Global Allocation is 2.23 times less risky than FF Global. It trades about 0.07 of its potential returns per unit of risk. FF Global is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,253  in FF Global on October 5, 2024 and sell it today you would earn a total of  1,146  from holding FF Global or generate 18.33% return on investment over 90 days.

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

BGF Global Allocation  vs.  FF Global

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.

FF Global

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days FF Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather weak technical and fundamental indicators, FF Global may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BGF Global and FF Global

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

The idea behind BGF Global Allocation and FF Global 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 Transaction History module to view history of all your transactions and understand their impact on performance.