Correlation Between BGF Retail and IQuest

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Can any of the company-specific risk be diversified away by investing in both BGF Retail and IQuest 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 Retail and IQuest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BGF Retail Co and IQuest Co, you can compare the effects of market volatilities on BGF Retail and IQuest 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 Retail with a short position of IQuest. Check out your portfolio center. Please also check ongoing floating volatility patterns of BGF Retail and IQuest.

Diversification Opportunities for BGF Retail and IQuest

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between BGF and IQuest is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding BGF Retail Co and IQuest Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQuest and BGF Retail 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 Retail Co are associated (or correlated) with IQuest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQuest has no effect on the direction of BGF Retail i.e., BGF Retail and IQuest go up and down completely randomly.

Pair Corralation between BGF Retail and IQuest

Assuming the 90 days trading horizon BGF Retail Co is expected to under-perform the IQuest. But the stock apears to be less risky and, when comparing its historical volatility, BGF Retail Co is 1.47 times less risky than IQuest. The stock trades about -0.08 of its potential returns per unit of risk. The IQuest Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  215,000  in IQuest Co on September 5, 2024 and sell it today you would earn a total of  27,500  from holding IQuest Co or generate 12.79% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

BGF Retail Co  vs.  IQuest Co

 Performance 
       Timeline  
BGF Retail 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BGF Retail Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
IQuest 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in IQuest Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IQuest sustained solid returns over the last few months and may actually be approaching a breakup point.

BGF Retail and IQuest Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BGF Retail and IQuest

The main advantage of trading using opposite BGF Retail and IQuest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BGF Retail position performs unexpectedly, IQuest 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 IQuest will offset losses from the drop in IQuest's long position.
The idea behind BGF Retail Co and IQuest Co 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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