Correlation Between BF Investment and Fortis Healthcare

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

Diversification Opportunities for BF Investment and Fortis Healthcare

0.51

Correlation Coefficient

BF Investment  Fortis Healthcare

Very weak diversification

The 3 months correlation between BFINVEST and Fortis is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Fortis Healthcare Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Healthcare 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 Fortis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Healthcare has no effect on the direction of BF Investment i.e., BF Investment and Fortis Healthcare go up and down completely randomly.

Pair Corralation between BF Investment and Fortis Healthcare

Assuming the 90 days trading horizon BF Investment is expected to generate 1.92 times less return on investment than Fortis Healthcare. In addition to that, BF Investment is 1.48 times more volatile than Fortis Healthcare Limited. It trades about 0.07 of its total potential returns per unit of risk. Fortis Healthcare Limited is currently generating about 0.19 per unit of volatility. If you would invest  58,005  in Fortis Healthcare Limited on October 6, 2024 and sell it today you would earn a total of  15,200  from holding Fortis Healthcare Limited or generate 26.2% return on investment over 90 days.

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

BF Investment Limited  vs.  Fortis Healthcare Limited

BF Investment Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, BF Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fortis Healthcare

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Healthcare Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Fortis Healthcare sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BF Investment and Fortis Healthcare

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

The idea behind BF Investment Limited and Fortis Healthcare 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.