Correlation Between BF Investment and Data Patterns

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

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

Diversification Opportunities for BF Investment and Data Patterns

0.19

Correlation Coefficient

BF Investment  Data Patterns

Average diversification

The 3 months correlation between BFINVEST and Data is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Data Patterns Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Patterns Limited and BF 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 BF Investment Limited are associated (or correlated) with Data Patterns. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Patterns Limited has no effect on the direction of BF Investment i.e., BF Investment and Data Patterns go up and down completely randomly.

Pair Corralation between BF Investment and Data Patterns

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the Data Patterns. In addition to that, BF Investment is 1.09 times more volatile than Data Patterns Limited. It trades about -0.18 of its total potential returns per unit of risk. Data Patterns Limited is currently generating about -0.15 per unit of volatility. If you would invest  265,015  in Data Patterns Limited on October 8, 2024 and sell it today you would lose (16,490) from holding Data Patterns Limited or give up 6.22% of portfolio value over 90 days.

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

BF Investment Limited  vs.  Data Patterns Limited

BF Investment Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, BF Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Data Patterns Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Data Patterns Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Data Patterns may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BF Investment and Data Patterns

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

The idea behind BF Investment Limited and Data Patterns 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.

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.