Correlation Between Bombay Burmah and ROUTE MOBILE

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

Diversification Opportunities for Bombay Burmah and ROUTE MOBILE

0.65

Correlation Coefficient

Bombay Burmah  ROUTE MOBILE

Poor diversification

The 3 months correlation between Bombay and ROUTE is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bombay Burmah Trading and ROUTE MOBILE LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROUTE MOBILE LIMITED 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 ROUTE MOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROUTE MOBILE LIMITED has no effect on the direction of Bombay Burmah i.e., Bombay Burmah and ROUTE MOBILE go up and down completely randomly.

Pair Corralation between Bombay Burmah and ROUTE MOBILE

Assuming the 90 days trading horizon Bombay Burmah Trading is expected to generate 1.96 times more return on investment than ROUTE MOBILE. However, Bombay Burmah is 1.96 times more volatile than ROUTE MOBILE LIMITED. It trades about -0.06 of its potential returns per unit of risk. ROUTE MOBILE LIMITED is currently generating about -0.13 per unit of risk. If you would invest  260,165  in Bombay Burmah Trading on September 21, 2024 and sell it today you would lose (32,010) from holding Bombay Burmah Trading or give up 12.3% of portfolio value over 90 days.

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

Bombay Burmah Trading  vs.  ROUTE MOBILE LIMITED

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 latest abnormal performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ROUTE MOBILE LIMITED

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ROUTE MOBILE LIMITED has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Bombay Burmah and ROUTE MOBILE

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

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