Correlation Between BF Investment and Innova Captab

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

Diversification Opportunities for BF Investment and Innova Captab

0.2

Correlation Coefficient

BF Investment  Innova Captab

Modest diversification

The 3 months correlation between BFINVEST and Innova is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Innova Captab Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innova Captab 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 Innova Captab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innova Captab Limited has no effect on the direction of BF Investment i.e., BF Investment and Innova Captab go up and down completely randomly.

Pair Corralation between BF Investment and Innova Captab

Assuming the 90 days trading horizon BF Investment Limited is expected to under-perform the Innova Captab. But the stock apears to be less risky and, when comparing its historical volatility, BF Investment Limited is 1.06 times less risky than Innova Captab. The stock trades about -0.21 of its potential returns per unit of risk. The Innova Captab Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  98,670  in Innova Captab Limited on October 23, 2024 and sell it today you would earn a total of  4,940  from holding Innova Captab Limited or generate 5.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

BF Investment Limited  vs.  Innova Captab Limited

BF Investment Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BF Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Innova Captab Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innova Captab Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Innova Captab exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BF Investment and Innova Captab

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

The idea behind BF Investment Limited and Innova Captab 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.