Correlation Between Bombay Burmah and Pilani Investment

Can any of the company-specific risk be diversified away by investing in both Bombay Burmah and Pilani Investment 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 Bombay Burmah and Pilani Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bombay Burmah Trading and Pilani Investment and, you can compare the effects of market volatilities on Bombay Burmah and Pilani Investment 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 Bombay Burmah with a short position of Pilani Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bombay Burmah and Pilani Investment.

Diversification Opportunities for Bombay Burmah and Pilani Investment

0.3

Correlation Coefficient

Bombay Burmah  Pilani Investment

Weak diversification

The 3 months correlation between Bombay and Pilani is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bombay Burmah Trading and Pilani Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilani Investment and Bombay Burmah 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 Bombay Burmah Trading are associated (or correlated) with Pilani Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilani Investment has no effect on the direction of Bombay Burmah i.e., Bombay Burmah and Pilani Investment go up and down completely randomly.

Pair Corralation between Bombay Burmah and Pilani Investment

Assuming the 90 days trading horizon Bombay Burmah is expected to generate 1.18 times less return on investment than Pilani Investment. In addition to that, Bombay Burmah is 1.13 times more volatile than Pilani Investment and. It trades about 0.07 of its total potential returns per unit of risk. Pilani Investment and is currently generating about 0.1 per unit of volatility. If you would invest  185,841  in Pilani Investment and on October 4, 2024 and sell it today you would earn a total of  357,519  from holding Pilani Investment and or generate 192.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Bombay Burmah Trading  vs.  Pilani Investment and

Bombay Burmah Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombay Burmah Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pilani Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pilani Investment and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Pilani Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bombay Burmah and Pilani Investment

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

The idea behind Bombay Burmah Trading and Pilani Investment and 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.