Correlation Between BF Investment and Elin Electronics

Can any of the company-specific risk be diversified away by investing in both BF Investment and Elin Electronics 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 Elin Electronics 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 Elin Electronics Limited, you can compare the effects of market volatilities on BF Investment and Elin Electronics 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 Elin Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of BF Investment and Elin Electronics.

Diversification Opportunities for BF Investment and Elin Electronics

-0.32

Correlation Coefficient

BF Investment  Elin Electronics

Very good diversification

The 3 months correlation between BFINVEST and Elin is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Elin Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elin Electronics 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 Elin Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elin Electronics has no effect on the direction of BF Investment i.e., BF Investment and Elin Electronics go up and down completely randomly.

Pair Corralation between BF Investment and Elin Electronics

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the Elin Electronics. In addition to that, BF Investment is 1.08 times more volatile than Elin Electronics Limited. It trades about -0.29 of its total potential returns per unit of risk. Elin Electronics Limited is currently generating about -0.26 per unit of volatility. If you would invest  22,393  in Elin Electronics Limited on October 8, 2024 and sell it today you would lose (2,743) from holding Elin Electronics Limited or give up 12.25% of portfolio value over 90 days.

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

BF Investment Limited  vs.  Elin Electronics 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 weak technical and fundamental indicators, BF Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Elin Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elin Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with BF Investment and Elin Electronics

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

The idea behind BF Investment Limited and Elin Electronics 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.