Correlation Between BF Investment and Lotus Eye

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

Diversification Opportunities for BF Investment and Lotus Eye

-0.72

Correlation Coefficient

BF Investment  Lotus Eye

Pay attention - limited upside

The 3 months correlation between BFINVEST and Lotus is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding BF Investment Limited and Lotus Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Eye Hospital 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 Lotus Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Eye Hospital has no effect on the direction of BF Investment i.e., BF Investment and Lotus Eye go up and down completely randomly.

Pair Corralation between BF Investment and Lotus Eye

Assuming the 90 days trading horizon BF Investment Limited is expected to generate 1.24 times more return on investment than Lotus Eye. However, BF Investment is 1.24 times more volatile than Lotus Eye Hospital. It trades about 0.13 of its potential returns per unit of risk. Lotus Eye Hospital is currently generating about -0.02 per unit of risk. If you would invest  58,325  in BF Investment Limited on September 2, 2024 and sell it today you would earn a total of  14,955  from holding BF Investment Limited or generate 25.64% return on investment over 90 days.

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

BF Investment Limited  vs.  Lotus Eye Hospital

BF Investment Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BF Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, BF Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lotus Eye Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lotus Eye Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Lotus Eye is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BF Investment and Lotus Eye

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

The idea behind BF Investment Limited and Lotus Eye Hospital 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.