Correlation Between BGF Global and Nova Europe

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

Diversification Opportunities for BGF Global and Nova Europe

-0.76

Correlation Coefficient

BGF Global  Nova Europe

Pay attention - limited upside

The 3 months correlation between BGF and Nova is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding BGF Global Allocation and Nova Europe ISR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Europe ISR 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 Nova Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Europe ISR has no effect on the direction of BGF Global i.e., BGF Global and Nova Europe go up and down completely randomly.

Pair Corralation between BGF Global and Nova Europe

Assuming the 90 days trading horizon BGF Global Allocation is expected to generate 1.37 times more return on investment than Nova Europe. However, BGF Global is 1.37 times more volatile than Nova Europe ISR. It trades about 0.07 of its potential returns per unit of risk. Nova Europe ISR is currently generating about -0.23 per unit of risk. If you would invest  7,379  in BGF Global Allocation on September 23, 2024 and sell it today you would earn a total of  174.00  from holding BGF Global Allocation or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

BGF Global Allocation  vs.  Nova Europe ISR

BGF Global Allocation

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BGF Global Allocation are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Nova Europe ISR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Europe ISR has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Nova Europe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BGF Global and Nova Europe

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

The idea behind BGF Global Allocation and Nova Europe ISR 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.