Correlation Between BF and Tokocrypto

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

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

Diversification Opportunities for BF and Tokocrypto

0.31

Correlation Coefficient

BF  Tokocrypto

Weak diversification

The 3 months correlation between BF and Tokocrypto is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding BF and Tokocrypto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokocrypto and BF 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 BF are associated (or correlated) with Tokocrypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokocrypto has no effect on the direction of BF i.e., BF and Tokocrypto go up and down completely randomly.

Pair Corralation between BF and Tokocrypto

Assuming the 90 days horizon BF is expected to generate 0.3 times more return on investment than Tokocrypto. However, BF is 3.36 times less risky than Tokocrypto. It trades about -0.07 of its potential returns per unit of risk. Tokocrypto is currently generating about -0.02 per unit of risk. If you would invest  0.29  in BF on December 1, 2024 and sell it today you would lose (0.04) from holding BF or give up 12.58% of portfolio value over 90 days.

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

BF  vs.  Tokocrypto

BF

Risk-Adjusted Performance

Very Weak

Over the last 90 days BF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for BF shareholders.

Tokocrypto

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tokocrypto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Tokocrypto shareholders.

Pair Trading with BF and Tokocrypto

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

The idea behind BF and Tokocrypto 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.