Correlation Between AUTHUM INVESTMENT and BF Utilities

Can any of the company-specific risk be diversified away by investing in both AUTHUM INVESTMENT and BF Utilities 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 AUTHUM INVESTMENT and BF Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AUTHUM INVESTMENT INFRASTRUCTU and BF Utilities Limited, you can compare the effects of market volatilities on AUTHUM INVESTMENT and BF Utilities 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 AUTHUM INVESTMENT with a short position of BF Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTHUM INVESTMENT and BF Utilities.

Diversification Opportunities for AUTHUM INVESTMENT and BF Utilities

0.43

Correlation Coefficient

AUTHUM INVESTMENT  BF Utilities

Very weak diversification

The 3 months correlation between AUTHUM and BFUTILITIE is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AUTHUM INVESTMENT INFRASTRUCTU and BF Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BF Utilities Limited and AUTHUM INVESTMENT 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 AUTHUM INVESTMENT INFRASTRUCTU are associated (or correlated) with BF Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BF Utilities Limited has no effect on the direction of AUTHUM INVESTMENT i.e., AUTHUM INVESTMENT and BF Utilities go up and down completely randomly.

Pair Corralation between AUTHUM INVESTMENT and BF Utilities

Assuming the 90 days trading horizon AUTHUM INVESTMENT INFRASTRUCTU is expected to under-perform the BF Utilities. But the stock apears to be less risky and, when comparing its historical volatility, AUTHUM INVESTMENT INFRASTRUCTU is 1.11 times less risky than BF Utilities. The stock trades about -0.12 of its potential returns per unit of risk. The BF Utilities Limited is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  85,115  in BF Utilities Limited on September 1, 2024 and sell it today you would earn a total of  13,500  from holding BF Utilities Limited or generate 15.86% return on investment over 90 days.

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

AUTHUM INVESTMENT INFRASTRUCTU  vs.  BF Utilities Limited

AUTHUM INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTHUM INVESTMENT INFRASTRUCTU has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AUTHUM INVESTMENT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

BF Utilities Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Utilities Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, BF Utilities demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AUTHUM INVESTMENT and BF Utilities

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

The idea behind AUTHUM INVESTMENT INFRASTRUCTU and BF Utilities Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.